<DOC>
[108 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:94605.wais]
S. Hrg. 108-505
REAUTHORIZATION OF THE
ECONOMIC DEVELOPMENT ADMINISTRATION
=======================================================================
HEARING
before the
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
APRIL 28, 2004
__________
Printed for the use of the Committee on Environment and Public Works
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio HARRY REID, Nevada
MICHAEL D. CRAPO, Idaho BOB GRAHAM, Florida
LINCOLN CHAFEE, Rhode Island JOSEPH I. LIEBERMAN, Connecticut
JOHN CORNYN, Texas BARBARA BOXER, California
LISA MURKOWSKI, Alaska RON WYDEN, Oregon
CRAIG THOMAS, Wyoming THOMAS R. CARPER, Delaware
WAYNE ALLARD, Colorado HILLARY RODHAM CLINTON, New York
Andrew Wheeler, Majority Staff Director
Ken Connolly, Minority Staff Director
C O N T E N T S
----------
Page
APRIL 28, 2004
OPENING STATEMENTS
Allard, Hon. Wayne, U.S. Senator from the State of Colorado...... 19
Baucus, Hon. Max, U.S. Senator from the State of Montana,
prepared statement............................................. 37
Bond, Hon. Christopher S., U.S. Senator from the State of
Missouri....................................................... 5
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 21
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho..... 5
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 1
Jeffords, Hon. James M., U.S. Senator from the State of Vermont.. 2
Murkowski, Hon. Lisa, U.S. Senator from the State of Alaska...... 15
Thomas, Hon. Craig, U.S. Senator from the State of Wyoming,
prepared statement............................................. 37
Wyden, Hon. Ron, U.S. Senator from the State of Oregon........... 7
WITNESSES
Gatson, Charles R., vice president and Chief Operating Officer,
Swope Community Builders....................................... 28
Prepared statement........................................... 75
Gorshing, Gary, president, National Association of Development
Organizations.................................................. 25
Prepared statement........................................... 65
Sampson, David A., Assistant Secretary of Commerce for Economic
Development, Economic Development Administration............... 8
Prepared statement........................................... 39
Responses to additional questions from:
Senator Baucus............................................... 61
Senator Jeffords............................................. 46
Senator Murkowski............................................ 62
Senator Thomas............................................... 60
Saudade, James J., deputy commissioner, Department of Housing and
Community Affairs, State of Vermont............................ 27
Prepared statement........................................... 72
Singerman, Phillip A., executive director, Maryland Technology
Development Corporation, on behalf of the International
Economic Development Council................................... 30
Prepared statement........................................... 77
Responses to additional questions from Senator Jeffords...... 80
ADDITIONAL MATERIAL
Charts:
EDA Investments and Advance Faith-Based Social
Entrepreneurship and Redevelopment Strategies, FY 2002 to
Date and Over $1M in EDA Funding, May 12, 2004............. 59
EDA Investments FY 1998 to Date In the State of Vermont, May
12, 2004................................................... 52-53
EDA Investments to the Philadelphia Region Office FY 1998-
2004 to Date for Public Works, EA Construction and RLF
Only, Average Estimated Private Investment Leveraged per
EDA$, May 12, 2004......................................... 54
EDA Public Works, EA Construction and RLF Investment FY 1998
to Date In the State of Vermont, May 12, 2004.............. 51
EDA Revolving Loan Fund Investments, FY 1998 to date, Sorted
by FY and State, May 12, 2004.............................. 55-58
Letter, Union County Board of Commissioners to Oregon
Congressional Delegation....................................... 88
Policy Recommendations, International Economic Development
Council (IEDC)................................................. 80-84
Statement, National Association of Regional Councils and National
Association of Counties........................................ 86
REAUTHORIZATION OF THE ECONOMIC DEVELOPMENT ADMINISTRATION
----------
WEDNESDAY, APRIL 28, 2004
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m. in room
SD-406, Senate Dirksen Building, Hon. James M. Inhofe (chairman
of the committee) presiding.
Present: Senators Inhofe, Bond, Crapo, Murkowski, Allard,
Jeffords, Wyden, and Clinton.
OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM
THE STATE OF OKLAHOMA
Senator Inhofe. The meeting will come to order.
First of all, good morning, and we thank all the witnesses
for appearing before us today. A special welcome to Gary
Gorshing, who is here from Oklahoma, from southwest Oklahoma.
We are glad to have you here, Gary, and look forward to your
testimony. That is one thing nice about being Chairman of the
committee, you can always have a witness from Oklahoma.
Senator Jeffords. I remember my days.
Senator Inhofe. Well, you have one from Vermont; so do not
cry.
Senator Jeffords. All right.
Senator Inhofe. This hearing today is to discuss the
reauthorization of the Economic Development Administration. It
was created in 1965 to provide assistance to economically
distressed areas, primarily those experiencing substantial and
persistent unemployment and poverty. We have a lot of those
problems in Oklahoma that, of course, Vermont does not have. So
I am more concerned about this probably. These areas count on
EDA to help create favorable environments for long-term
economic growth. Studies have shown that EDA uses Federal
dollars efficiently and effectively, creating and retaining
long-term jobs at an average cost that is among the lowest in
the Government.
We have had some great successes working with EDA in our
home State of Oklahoma; overall, in the last decade, EDA
investments of about $47 million, leveraged by $42 million in
State and local dollars, and more than $1 billion in private
sector dollars. Now, that is what this is all about, that is
what we are supposed to be doing. Altogether, these investments
created or saved more than 13,000 jobs just in my State.
More specifically, just about a year ago, I joined Dr.
Sampson as he presented an award to the city of Durant and the
Choctaw Nation of Oklahoma for a public works project. The
project is construction of an industrial park and
infrastructure to support the expansion of a Big Lots, Inc.
distribution facility. It will include significant local,
State, tribal, and private investment and will support more
than 300 jobs. I know we will have many more of these success
stories as time goes by. I am sure, Mr. Sampson, you were
impressed with the very large turnout that was there with you
and me on that date.
The EDA contributes to important projects like this all
across the country. Reauthorization gives us an opportunity to
talk about the efficiencies and about areas where we might have
room for improvement. One thing I would like to pursue, and
perhaps you could address this in your opening statement, and
maybe your predecessor on the next panel could also do it, is
we have been disturbed a little bit recently about some of the
language I have seen on EDA's work on brownfields that would
change the role from redeveloping to remediation of these
sites. As you and I talked in my office, Mr. Sampson, that is
the role of the EPA, EDA is supposed to be creating jobs. So
maybe we can talk about that as we move on. Thank you very much
for appearing.
[The prepared statement of Senator Inhofe follows:]
Statement of Senator James M. Inhofe, U.S. Senator from the
State of Oklahoma
Good morning. Thank you to all of our witnesses for appearing
before us today and a special welcome to Mr. Gary Gorshing from
southwestern Oklahoma. We're glad to have you here, Gary, and I look
forward to your testimony.
Today's hearing is to discuss reauthorization of the Economic
Development Administration. EDA was created in 1965 to provide
assistance to economically distressed areas, primarily those
experiencing substantial and persistent unemployment and poverty. These
areas count on EDA to help create favorable environments for long-term
economic growth. Studies have shown that EDA uses Federal dollars
efficiently and effectively creating and retaining long-term jobs at an
average cost that is among the lowest in government.
We've had some great successes working with EDA in my home State of
Oklahoma. Overall, in the last decade, EDA investments of about $47
million, leveraged $42 million in State and local dollars and more than
$1 billion in private sector dollars. All together, these investments
created or saved more than 13,000 jobs. More specifically, just about a
year ago, I joined Dr. Sampson as he presented an award to the city of
Durant and the Choctaw Nation of Oklahoma for a public works project.
The project is construction of industrial park infrastructure to
support expansion of a Big Lots, Inc. distribution facility. It will
include significant local, State, tribal and private investment and
will support more than 300 new jobs. I know we will have many more of
these success stories in the future as well. In fact, just yesterday we
announced $2.1 million in EDA project and planning grants for the State
of Oklahoma. I look forward to seeing the benefits of these good
investments in the coming months and years.
EDA contributes to important projects like this all across the
country. Reauthorization gives us an opportunity to ensure the
continuation of this good work and to provide the tools necessary to
improve performance even further. I look forward to hearing from
today's witnesses and to working with my committee colleagues, the
Administration and interested stakeholders to move a reauthorization
bill as quickly as we can.
Senator Inhofe. Senator Jeffords.
OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
THE STATE OF VERMONT
Senator Jeffords. Good morning, Mr. Chairman. Thank you for
holding this hearing today on the Economic Development
Administration (EDA). I am delighted to be here to discuss the
reauthorization of this very important Agency.
EDA and its programs provide vital financial and technical
assistance to our Nation and to my home State of Vermont. I am
so pleased to welcome a witness from Vermont, James Saudade,
the deputy commissioner of the Vermont Department of Housing
and Community Affairs. He most recently completed 7 years as
executive director of the Green Mountain Economic Development
Corporation and has valuable insight into EDA's performance in
Vermont. Welcome, Mr. Saudade.
During the past 10 years, Vermont has seen an EDA
investment totaling over $13 million. This investment has
created over 750 jobs and leveraged over $89 million of private
sector investment in our small rural State. Vermont's State and
local match dollars total $22 million. These are significant
economic investments for a small State. Through regional
planning grants and infrastructure project money, the Economic
Development Administration has been a vital and willing partner
in Vermont's economic growth. In fact, the last time Dr.
Sampson and I were together we were in the bucolic setting of
rural Randolph, VT, announcing a new business incubator
initiative. This initiative represents a wonderful
collaboration between the Federal Government, higher technical
education, and local Vermont business community.
In addition to commending EDA for its important role, I am
here to explore how the Agency can do its job more efficiently
and effectively despite being hamstrung by budgets being
authorized levels and far below the economic development needs
of this country. I am also interested in exploring how EDA's
programs meet the needs of rural States, like Vermont, which
suffer not only from high poverty levels and unemployment but
underemployment as well.
We all know the critical importance of innovation and
value-added industries. However, where would we be without the
preliminary planning process that informs any successful
economic initiative. EDA has a very important role to play in
supporting planning at the local level. Nationwide, EDA has
spearheaded the development of the business incubators,
creating a platform for a variety of entrepreneurs to grow
small businesses. It is a great idea. Small business is the
backbone of our country. The economy and statistics tell us
that it is. A supported startup in a business incubator has far
better possibilities of success.
I appreciate hearing many more people talk about the
fundamental importance of linking research universities to
businesses. Ideas need a hospitable environment in which to
incubate in order to create new enterprises. Support for the
university centers and technology transfer they may foster from
the laboratory to the marketplace is very important in our
economy. These opportunities result in high paying, skilled
jobs and prosperity for our citizens. EDA must continue to make
work force development a high priority so that the United
States can meet the skill needs of the global marketplace.
Brownfield redevelopment is another area of great interest
to me. The State of Vermont has over 2,000 brownfield sites.
Only a handful of these have been declared cleaned up. It is my
hope that EDA can play a larger role in the economic
redevelopment of these brownfield sites in order to diminish
the amount of industrial property sitting idle.
Mr. Chairman, thank you for scheduling this hearing at the
full committee level. I look forward to hearing testimony from
this morning's witnesses.
[The prepared statement of Senator Jeffords follows:]
Statement of Senator James M. Jeffords, U.S. Senator from the
State of Vermont
Good morning. Mr. Chairman, thank you for holding this hearing
today on the Economic Development Administration (EDA). I am delighted
to be here to discuss the reauthorization of this very important
Agency. EDA and its programs provide vital financial and technical
assistance to our Nation and to my home State of Vermont.
I am also pleased to welcome a witness from Brownsville, Vermont--
James Saudade, the Deputy Commissioner of the Vermont Department of
Housing and Community Affairs. He most recently completed 7 years as
the Executive Director of the Green Mountain Economic Development
Corporation and has valuable insight into EDA's performance in Vermont.
Welcome Mr. Saudade.
During the past 10 years Vermont has seen an EDA investment
totaling over $13 million. This investment has created over 750 jobs
and leveraged over $89 million of private sector investment in our
small rural State. Vermont's State and local match dollars total $22
million. These are significant economic investments for a small State.
Through regional planning grants and infrastructure project money,
the Economic Development Administration has been a vital and willing
partner in Vermont's economic growth. In fact, the last time Dr.
Sampson and I were together, we were in the bucolic setting of rural
Randolph, Vermont announcing a new business incubator initiative. This
initiative represents a wonderful collaboration between the Federal
Government, higher technical education, and the local Vermont business
community.
In addition to commending EDA for its important role, I am here to
explore how the Agency can do its job more efficiently and effectively
despite being hamstrung by budgets below authorized levels and far
below the economic development needs of this country.
I am also interested in exploring how EDA's programs meet the needs
of a rural State like Vermont, which suffers not only from high poverty
levels and unemployment, but under-employment as well.
We all know the critical importance of innovation and value-added
industries. However, where would we be without the preliminary planning
process that informs any successful economic initiative?
EDA has an important role to play in supporting planning at the
local level. Nationwide, EDA has spearheaded the development of
business incubators. Creating a platform for a variety of entrepreneurs
to grow small businesses is a great idea. Small business is the
backbone of our economy. The statistics tell us that a supported
startup in a business incubator has a far better possibility of
success.
I appreciate hearing many more people talk about the fundamental
importance of linking research universities to businesses. Ideas need a
hospitable environment in which to incubate in order to create new
enterprise. Support for University Centers and the technology transfer
they foster from the laboratory to the marketplace is very important to
our economy. These opportunities result in high paying skilled jobs and
prosperity for our citizens. EDA must continue to make work force
development a high priority so that the United States can meet the
skill demands of the global marketplace.
Brownfield redevelopment is another area of great interest to me.
The State of Vermont has over 2,000 brownfield sites. Only a handful of
these have been declared cleaned up. It is my hope that EDA can play a
larger role in the economic redevelopment of these brownfield sites in
order to diminish the amount of industrial property sitting idle.
Mr. Chairman, thank you for scheduling this hearing at the full
committee level. I look forward to hearing testimony from this
morning's witnesses.
Senator Inhofe. Thank you, Senator Jeffords.
Senator Crapo.
OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM
THE STATE OF IDAHO
Senator Crapo. Thank you very much, Mr. Chairman. I, too,
appreciate your holding this hearing and your strong work in
this area. I also want to welcome and acknowledge Dr. Sampson.
I would like to say at the outset that I believe the EDA is one
of those Federal Agencies that is really working well. It is
doing its job. As you can tell from the comments that have
already been made by other Senators, the results are visible on
the ground out in the States. I simply want to commend you for
the job that the Agency is doing.
That is not to say we do not have our issues once in a
while. But the fact is that you personally and your staff have
worked very closely with me when I have raised concerns or when
we have needs and issues. All over Idaho we can see the
evidence of the good work that EDA is doing in helping our
communities. I simply want to note that.
I want to specifically join in the Chairman's comments on
brownfields. We need to clean up the brownfields in this Nation
and we must give that the attention that it needs. There is a
role that the EDA can play in terms of the economic development
and jobs related to these kinds of issues. But I am very
concerned that we do not want to see funds diverted away from
jobs into a separate program that should be operated by the EPA
rather than by the EDA. I am very concerned to make sure that
we do not see a weakening in the focus of the Agency's efforts
so that we turn this Agency into a cleanup Agency rather than
into an economic development and a jobs oriented Agency. So I
share in the Chairman's comments in that context.
Last, I would simply say that, as you know, Dr. Sampson, I
have some concerns about the formula that has been recently
changed with regard to the trade assistance adjustment centers.
We will work together on that between ourselves and I will not
necessarily bring it up or make it a big issue here. But I am
very concerned about the recent adjustments in this formula
that have, in my opinion, made it more difficult for us to get
the kinds of resources and support into the rural areas that we
need. So I will be working with you personally on that more in
the future.
Thank you again very much for your great work and this
Agency's work.
Senator Inhofe. Thank you, Senator Crapo. I have talked to
Secretary Sampson about this. I know he shares our views on the
proper role of EDA.
Senator Bond.
OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR
FROM THE STATE OF MISSOURI
Senator Bond. Thank you very much, Mr. Chairman. Welcome,
Dr. Sampson. I would join in with concerns that apparently you
have expressed and Senator Crapo have expressed.
I am very pleased that, under the leadership of Dr.
Sampson, the Economic Development Administration has been
transforming itself into a results oriented Agency, maximizing
the economic impact of each and every dollars while at the same
time maintaining its core focus on empowering distressed
communities to develop and implement their own economic
development strategies. I think EDA has remained true to its
guidelines.
EDA assistance in Missouri has been a great boon to local
investment. Over the last decade, some 300 projects have
resulted in investments of more than $150 million in Missouri,
leading to the creation of 5,000 jobs and leveraging an
additional $1.4 billion, roughly, in private and State and
local funding. EDA has recently invested in several good
activities. Last August, EDA awarded a $2 million grant as seed
capital for the North H. Shell wetlab space, which is
tremendously important in moving forward in biotechnology.
I think it is important EDA continue transforming itself
from a culture of compliance to a culture of performance. In
the past, too often, economic development districts would be
rewarded for simply being a member of an economic development
district and filling out the paperwork. I think changing the
structure to reward districts for their achievements while
motivating others to improve makes a lot of sense.
The EDA should achieve its maximum impact with every
dollar. I also think the Administration has to remember its
legislative mandate to aid distressed communities. I am
concerned about the new standards of EDA regarding the minimum
amount of money leveraged and jobs created per EDA dollar. It
is my understanding that under the new Balance Scorecard
measurement, a region must meet an average of no less than $22
non-EDA dollars for each EDA dollar, and no more than $5,000 of
EDA funds per job created. This could wind up funding only
projects that are in a strong position to leverage a maximum
amount of jobs and investment already. A recent example, a
southwest area career center in Monett, MO, was turned down
because it did not have the new direct job creation
requirements. I think in Mexico, MO, EDA has looked at putting
some resources into job training in an area where resource-
heavy industries such as refractories industries have been shut
down and we are looking for skilled work forces to replace
them.
But I look forward to hearing your testimony and the
testimony of other witnesses as we work toward a
reauthorization, a multi-year authorization that will support
the good, new path on which you and this Administration have
chosen to put EDA. Thank you.
[The prepared statement of Senator Bond follows:]
Statement of Senator Christopher S. Bond, U.S. Senator from the
State of Missouri
Thank you Mr. Chairman. I am pleased to be here today to discuss
the reauthorization of the Economic Development Administration. Under
the leadership of Dr. Sampson the Economic Development Administration
has begun the transformation into a results oriented Agency that
maximizes the economic impact of each and every dollar while at the
same time, maintaining its core focus on empowering distressed
communities to develop and implement their own economic development and
revitalization strategies.
EDA has been successful over the years because it has remained true
to the guideline that ``distressed communities must be empowered to
develop and implement their own economic revitalization strategies.''
EDA assistance in Missouri has truly been a boon to local
investment and economic growth. For instance, over the last decade EDA
has implemented over 300 projects and invested more than $115 million
in Missouri. Since 1998, EDA funds have led to the creation of over
5,000 jobs in my State and leveraged an additional $684.7 million in
private sector funds and $83.1 million in State and local funding.
Recently, EDA has invested in several economic development
initiatives in Missouri that have continued to diversify the job base
with a focus on high-tech, high-growth industry. For example, last
August EDA awarded a $2 million grant as seed capital for the ``North
8'' shell wet lab space.
It is important that EDA continue its transformation from a
``culture of compliance to a culture of performance.'' I support
implementing further incentives that reward deserving projects and
their communities based on their performance.
Economic development districts are rewarded for simply being a
member of an economic development district. A change in this structure
will reward districts for their achievements while motivating others to
improve further.
While it is important for EDA to achieve the maximum impact with
every dollar, the Administration must also remember its legislative
mandate to aid distressed communities.
Specifically, I am referring to EDA's new standards regarding the
minimum amount of money leveraged and jobs created per EDA dollar. It
is my understanding, that under the new ``balanced score card''
measurement rules, the region must meet an average of no less than 22
non-EDA dollars per each EDA dollar and more no more than $5,000 EDA
funds per job created. It is my concern that EDA may become overly
focused on funding only projects that can leverage a maximum amount of
jobs and investment.
These new criterion will be devastating to distressed rural and
urban communities throughout Missouri.
One recent example of a project that has been rejected based on the
new standards is the Southwest Area Career Center in Monett, Missouri.
It is my understanding that this project was turned down expressly for
not meeting the new direct job creation requirements.
A better example of EDA's role in our Nation's evolving economy can
be found in my hometown of Mexico. As the economy continues to grow and
diversify away from natural resource heavy industries such as
firebrick, businesses in the surrounding area will need a highly
skilled work force.
My testimony has highlighted just a few examples of the
opportunities and needs for economic development across my State.
I look forward to hearing the testimony from our witnesses today
and look forward to working with you all in the future toward a multi-
year reauthorization of EDA.
Senator Inhofe. Thank you, Senator Bond.
Senator Wyden.
OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM THE
STATE OF OREGON
Senator Wyden. Thank you very much, Mr. Chairman. I really
appreciate your holding this hearing. As Mr. Sampson knows, he
and I have been going back and forth with a series of letters.
Anyway you slice it, Mr. Chairman and colleagues, the message
is out in the rural part of the country and in the rural west
that you have to come up with more dollars in the private
sector in order to get some additional help. I am just looking
at a letter that I got from the Union County Board of
Commissioners. Mr. Chairman, I would just ask unanimous consent
to have this made a part of the record.
Senator Inhofe. Without objection.
Senator Wyden. The first paragraph says it all. It says,
``We are writing to express deep concern regarding the new
2004 rule from the Economic Development Department regarding a
$22-to-$1 match for economic projects. Union County enjoys a
wonderful working relationship with our Federal partners
regarding our economic efforts.''
It goes on to say, as I have heard consistently throughout
my State, that the relationship with your Agency, Mr. Sampson,
is exceptional. It is very positive. Ann Berblinger, in
particular, has been an incredibly useful and constructive kind
of partner. I think this letter sums it up. It says, ``We see
this new rule to be a considerable barrier to our
partnership.''
I am going to have some detailed questions to ask when it
is appropriate, Mr. Chairman, and you have always been very
gracious about that. But having looked at these exchanges that
Mr. Sampson and I have had, and I appreciate the fact that you
have been willing to do them very quickly, Mr. Sampson, I think
it is clear that the message is out in the rural west in these
hard hit towns, many of which have unemployment way over 10
percent, is they have to figure out how to come up with
additional dollars in the private sector. I think that is
regrettable and I hope we can change it. I look forward to the
time when we can ask some questions. Thank you.
Senator Inhofe. Thank you, Senator Wyden. That time will be
shortly.
Secretary Sampson, and for the other witnesses on the
second panel, we will confine your opening remarks to 5
minutes. Your entire statement will be made a part of the
record. We will give a little more latitude to Secretary
Sampson since he is the only person on this panel. With that,
we will recognize you and thank you at the same time for the
fine job you are doing.
STATEMENT OF HON. DAVID A. SAMPSON, ASSISTANT SECRETARY OF
COMMERCE FOR ECONOMIC DEVELOPMENT, ECONOMIC DEVELOPMENT
ADMINISTRATION
Mr. Sampson. Thank you, Mr. Chairman, members of the
committee, it is a pleasure to be with you this morning. Thank
you for this opportunity. I have had the opportunity of touring
your States with many of you and look forward to the
opportunity of being in other Members' States with you.
Economic development is very near and dear to my heart. I
have dedicated much of my professional career to economic
development. Over the years, I have learned a lot. I have seen
what works and what does not work. I have had economic
development responsibilities at the local level in the Dallas/
Fort Worth area. I have had economic development
responsibilities for the entire State of Texas. I have also had
work force development responsibilities at the local and State
level. While I do not claim to have all the answers with
respect to economic development, the perspective I offer today
in my role as the Assistant Secretary for Economic Development
is one that has been informed by years of economic development
professional experience, careful review of the research, and
now almost 3 years as the head of EDA.
It is clear to me that the only constant in economic
development today is change. American companies face changing
competition, both domestically and from worldwide markets, and
government budgets are tied at the State and local as well as
at the Federal level. Just like our counterparts in the private
sector, Government Agencies must adapt and get the most from
our resources. As officials entrusted with public
responsibility, we ignore this new reality at our peril.
The reauthorization language builds upon the good work of
my predecessor in the previous Administration, Dr. Phillip
Singerman. His efforts and your support secured the
reauthorization of EDA 5 years ago, after a 16-year gap, and
set the stage for the improvements that we seek today.
Today, EDA's mission is to help lead the Federal economic
development agenda by promoting innovation and competitiveness,
preparing American communities for growth and success in the
worldwide economy. In order for EDA to achieve this mission and
for the Federal Government to be successful in its overall
economic development efforts, we need a new economic
development strategy for the 21st century. I believe this new
strategy has at least five elements.
No. 1, focusing on regional development. Economies are not
hermetically sealed along artificial political boundaries. The
evidence clearly shows that those regions that collaborate are
better able to attract the private capital that spurs job
creation.
No. 2, promoting America's innovative capacity. EDA
strongly supports innovation as a key driver of economic
development. At EDA, we believe the goal of economic
development is to increase prosperity, to increase the per-
capita income of the residents in your State. Productivity and
increased rates of productivity growth is the primary driver of
prosperity, and innovation is what drives productivity. That is
why we have made university-led and technology-led economic
development a funding priority for EDA.
No. 3, maintaining flexibility and local control. EDA's
development partners laud our program flexibility. However,
they have told us that we can do a better job, and this bill
increases our flexibility while maintaining accountability.
No. 4, enhancing coordination with other Federal programs.
The Federal Government spends a total of $20 billion a year in
economic development programs, spread across nine different
Federal Agencies. We believe that all of our communities,
especially the economically distressed communities, will be
better off if we can coordinate our efforts better. This
legislation supports a first step in that direction.
No. 5, focusing on results and rewarding performance. At
the end of the day, results are what matter most. This
legislation mirrors EDA's focus on results with language that
rewards our partners who exceed job creation and private
investment expectations.
Those are the broad thematic underpinnings of EDA's
reauthorization legislation. There are a couple of specific
provisions that warrant your attention. The first involves
Revolving Loan Funds.
Twenty-seven years ago EDA created the first economic
development Revolving Loan Fund. Today, we have a portfolio of
over 600 RLFs around the country, capitalized at over $1
billion. Reforms are needed to ensure the continued
effectiveness and accountability of these funds. Since 2001,
DOC's Inspector General has conducted 46 audits of EDA RLFs and
all but a handful of these audits revealed serious instances of
non-compliance or failure to safeguard RLF assets, such as
loans to ineligible borrowers, failure to properly document
loan decisions, poor accounting and financial management
practices, and failure to meet basic reporting requirements,
among other issues. We need additional tools that only Congress
can authorize to help us manage this portfolio better.
The second area, Mr. Chairman, is one that you mentioned,
and that is brownfields. I know the committee is keenly
interested in the brownfields provisions added by the House.
EDA is a very strong supporter of brownfield redevelopment. We
have made 269 investments in brownfield projects since 1999. We
average $50 million a year in grants to brownfield
redevelopment.
I believe the language inserted by the House will actually
reduce EDA's effectiveness in returning brownfields into
productive economic assets. Specifically, the provisions that
tie EDA to the CERCLA language causes us particular concern.
These provisions will graft limitations of CERCLA onto EDA's
brownfields activities that are not consistent with our
brownfield work. CERCLA is targeted to clean up programs, and
EDA's focus, on the other hand, is on the phase after the
cleanup takes place, the development of the site for job
creation and private investment. As written, the CERCLA alter
and I believe would ultimately wither our brownfields efforts.
Please know that I am confident after visiting with both
majority and minority staff that we can identify language that
will address your concerns and enable us to move forward with
our core mission, which is economic development and turning
brownfields back into productive assets.
In the interest of time, I have submitted more detailed
written testimony that I appreciate your including in the
record. I thank the committee for holding this hearing and I
look forward to answering your questions.
Senator Inhofe. So I would assume then that you are in
agreement with Senator Bond and myself and Senator Crapo when
we brought up this concern that we had with CERCLA?
Mr. Sampson. I certainly do. I think the CERCLA provisions
will be a very significant barrier. One of the greatest
implications of this is that it would preclude our ability to
work on the next round of BRAC closures, military base
closures, because military bases owned by the Federal
Government do not meet the definition for brownfields in the
CERCLA legislation, and EDA is a major player in getting
military bases back into productive assets. That is just one
example of how the CERCLA language would fundamentally change
our program.
Senator Inhofe. As you well know, being very familiar with
your neighbor to the north, Oklahoma, we are a rural State and
I expressed to you a concern that I had on the $22-to-$1
policy. So I would ask you on the record here if this is a
rule, how much flexibility there is in this, or is this a goal?
Mr. Sampson. That is a very good question, Mr. Chairman.
First of all let me say, it is not a rule. It is a goal. It is
one measure in our Balance Scorecard among many measures that
we look at in evaluating both our regional office performance
as well as evaluating individual projects.
The decision to look at private sector leverage is not one
that is arbitrary or capricious on our part. Global Insight,
which is one of the world's leading econ-metric and economic
development strategy firms, has said, ``Private capital
investment is a pre-requisite for job growth.'' EDA began
tracking private sector investment in its grants as a result of
the GPRA provisions back in 1997. We have been tracking and
looking at the private sector leverage since the 1997
timeframe. The actual data that we have was standardized and
begun to be collected in 1998.
So the degree to which the private sector is willing to
invest in a project we believe is a very clear indicator of the
successful outcome of that project. Professor Michael Porter at
Harvard was in town earlier this week and was talking to a
group of international economic development professionals and
made I think a very compelling point. That is, economic
development cannot be focused on the work of government at any
level--national, State, or local--that it has to be market-
driven and private sector led. That is why we have placed a
significant focus on private sector leverage.
That being said, the $22-to-$1 ratio is a goal. We have a
very broad diversity in our portfolio. What we are looking at
is a broad portfolio management at the regional level and at
the national level.
Senator Inhofe. Thank you. I agree with your
interpretation. Could you elaborate a little bit on the
Revolving Loan Fund audits, what they consist of now and what
you would like to have them be.
Mr. Sampson. Yes. The goal of the Administration under this
section of the legislation is, No. 1, to ensure better
financial integrity. No. 2, to allow RLFs to consolidate or
expand their lending area, at their request, not ours. Many
economic development organizations around the country manage
multiple RLFs. They may have a general purpose RLF, they may
have an RLF that was created as a result of a military base
closure, they may have an RLF that was created as a result of
natural disasters. As a result of that, they have multiple
reporting periods for each of those RLFs. What we are proposing
to do in the Administration's legislation is to allow them to
consolidate those RLFs into a single general purpose RLF which
will take them, in the case where they have three RLFs, from
six reports submitted a year to one report submitted a year.
No. 3, our proposal would allow third party service of an
RLF portfolio. In those cases where we have had RLFs that
simply were not performing, we have had an inability to close
those RLFs down because we did not have the ability to have
those RLFs managed by a third party.
No. 4, the RLF provisions in this bill would allow for
possible future securitization of RLF loans. There are other
Federal RLF funds that can be securitized. What we have done is
include placeholder language that if a significant market
develops for securitization, it would allow our RLFs to pursue
that course.
Now, with respect to the audits. When an RLF brings in an
auditor, the auditor can only look at what the OMB circular
says that they can look at, which is basic program functions.
What we are asking for authorization for in this bill would be
for us to define more broadly what the auditor can look for--
basic business practices as opposed to just looking at the
broad program practices. In essence, we have an RLF system
around this country that is unregulated. It is a separate
banking system. Banks and S&Ls all have very rigorous national
oversight. Our RLF program as it has evolved over the years
does not have that kind of rigorous oversight. The provisions
that we are asking for and that are included in the House bill
would enable us to look a little more deeply into the basic
business management practices of those RLFs.
Senator Inhofe. Secretary Sampson, thank you very much.
Senator Jeffords.
Senator Jeffords. Our country has been losing manufacturing
jobs at a staggering rate. Since the start of the recession,
Vermont has lost over 10 percent of the State's manufacturing
jobs. Could you tell me what EDA is doing to help communities
suffering from loss of manufacturing jobs and what authorities
the Administration is using?
Mr. Sampson. Senator Jeffords, the loss of any job is
regrettable. We believe that we have to stay focused on those
kinds of policies that are going to create jobs in this
country. That is certainly what our focus is at EDA and it is
the focus of the President's economic growth and jobs agenda.
We think we are beginning to see the job market come back and
we are starting to see hiring again.
EDA's particular focus is at the direction of the Secretary
of Commerce. He has directed us to give priority to those
communities that are experiencing the loss of manufacturing
jobs. We have tried to intervene early in those communities as
opposed to just waiting until the factory has closed down and
all of the lay-offs have taken place. We have tried to move EDA
in much more of a proactive measure, that as soon as the plant
closure is announced or as soon as significant lay-offs are
announced, we come in with a cross-disciplinary team, bringing
our colleagues from the Department of Labor in with the
Employment and Training Administration to early on develop a
retraining program, enhanced job training programs for those
workers who have been dislocated to help them get easy access
into continuing health care benefits. While we at EDA are
working with the community on developing a comprehensive
adjustment strategy, a strategy that is focused on retaining
their existing manufacturers, No. 1, but, No. 2, diversifying
their economic base, and then No. 3, helping that community
plan for and then implement the kind of economic infrastructure
that is going to enable them to tap into and compete in a
worldwide economy.
We have had some great success stories in that effort. I
think of an event that I did with Senator Bond I guess about a
year and a half ago now in St. Louis, where Ford announced a
closure of a major truck manufacturing plant in St. Louis. We
came in very early on, as soon as that closure was announced,
working with the St. Louis economic development authority and
the surrounding governments, providing them with funds to do an
economic adjustment strategy to look at some of the fundamental
business environment issues. The good news is, as a result of
that study and the teamwork that was involved both at the
Federal delegation level, State and local, they made a very
compelling case to Ford that made a decision to keep that plant
open. I think that is the kind of scenario we would like to
replicate around the country.
Senator Jeffords. Is EDA considering a regional
reorganization plan? If so, will this allow regional staff to
visit States more often?
Mr. Sampson. Senator Jeffords, we are operating under a
very tight budgetary environment. We have been flat funded now
in terms of our S&E account for 3 years running. That places
some very significant operating constraints on us. We were
concerned about that when we arrived 3 years ago as we looked
at the S&E funding level. As you know, we went through a
headquarters reorganization. We worked in very close
cooperation with committee staff and members on this committee
as we went through that process. The reason we did that was to
try to free up more resources to place out in the regional
office level where that direct interaction with the clients and
the communities take place. I am very pleased to be able to
tell you that we accomplished that headquarters reorganization
without a single involuntary separation. That is a commitment I
made to you personally, that is a commitment I made to this
committee's staff, and we were able to keep that commitment.
What we are looking at now is if we continue to be flat
funded at S&E moving forward, what are the implications for our
cost structure in the regional office level. I have asked our
six regional office directors to look at their business
processes to see where we can standardize and streamline those
across our six regional offices. They have made a report to me.
We are very carefully considering that. My commitment to you,
Senator, is that we will work very closely with you and this
committee staff, in the same way that we pursued our
headquarters reorganization, to make sure that we maintain the
capacity to deliver speedy and accurate service to the
communities and clients that we have around the country.
Senator Jeffords. Thank you. I see my time has expired. I
will submit my other questions.
Senator Inhofe. Thank you, Senator Jeffords.
Senator Bond.
Senator Bond. Thank you, Mr. Chairman. Dr. Sampson, Senator
Jeffords touched on the very important issue of job loss and
manufacturing job loss. As I understand it, the Department has
been dealing with this job loss problem in manufacturing for
quite a few years, it did not just come with the recession that
began in 2000, and there is a lot of talk about outsourcing.
Now I understand that the Department figures indicate that I
think it was $78 billion of job outsourcing was going on but
$134 billion worth of job insourcing was coming in. I would
like to know what your experience has been through your
administration with this job loss, and are you able to
facilitate more of the job insourcings so more foreign
companies are investing in the United States and hiring people.
How is that working? I think you are in a good position to give
us some how idea how that is working.
Mr. Sampson. Mr. Chairman, that is a great question. The
reality is that participation in the worldwide economy has
tremendous upside potential at the macro level and at the macro
level there is no country in the world that is better
positioned to take advantage of the worldwide markets than the
United States. You are right, the United States imports more
jobs from foreign companies than what we outsource. Last year,
we had a $77.3 billion surplus in jobs that are insourced into
the United States.
That having been said, clearly there are industry sectors
and there are sections of the country that are harder hit by
those changing trade patterns than other industry sectors. The
manufacturing sector has been particularly hard hit.
Manufacturing has been losing jobs as a percentage of the
private sector work force for the last 40 years. It has been
losing about \3/10\ of a percent of its percentage of total
employment over a period of about 30 years now. We believe that
we have a special and unique responsibility to work with those
communities and those regions that are going through this
structural economic change and dislocation and we have placed a
great deal of emphasis on that at Secretary Evans' direction.
We have been very active in the textile impacted regions of
this country, we have been very active in steel-based regions
of this country, and manufacturing-based regions of this
country, even as in previous years and previous administrations
EDA has focused on those economies that have been particularly
hard hit as they moved away from natural resource-based
economies.
There are communities that are making that adjustment
faster than others. We believe that one of the real key
elements of success in making this transition is tapping into
the power of universities in States around the country really
pursuing technology-led economic development strategies,
wedding work force development efforts with economic
development efforts. The Federal Government spends $23 billion
a year in work force development. We need to make sure the work
force development and economic development system are closely
wedded together.
Senator Bond. Well, coming from a part of my State which
has been hit hard by natural resource outsourcing, refractories
was dependent upon the steel industry and then they were
decimated by asbestos litigation. The jobs in northeast
Missouri have been outsourced thanks to asbestos litigation.
What specifically can EDA do in those areas to bring in,
you have mentioned the insourcing, what is it that EDA can do
to facilitate insourcing? We do not care where the jobs come
from, we just need jobs in northeast Missouri.
Mr. Sampson. We can help your communities buy down the cost
of basic infrastructure to attract new jobs into your State.
Some 6.4 million Americans work for companies that are owned
abroad. Just last week I was in the poorest county in Alabama,
Loundes County, Alabama, where we awarded a $2 million grant to
open the first county-wide industrial business park in that
county's history. They already have a tier I supplier to
Hyundai which is opening a major manufacturing plant outside of
Montgomery. This tier I supplier in the poorest county in
Alabama has already committed to invest $25 million in a plant
there and employ 200 people. I think that is a very dramatic
example of the role that our infrastructure grants can play in
helping communities be able to attract those jobs in the
future.
Senator Bond. Thank you very much, Dr. Sampson. You can
help also as well by developing technical training facilities,
for which we are most grateful. Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Bond.
It might be helpful for the record, I was very much
impressed with the statistic you used of the $77 billion
surplus of insourcing versus outsourcing, and it would be kind
of interesting to see this over about a 20-year period to see
where the trends are. Maybe you could get someone to do that
for us for the record.
Mr. Sampson. I would be happy to do that, contact my
colleagues at the Economic Statistics Administration that
actually run those numbers.
Senator Inhofe. OK. That is great.
Senator Murkowski, as you know, the rules of the committee
are that once opening statements are concluded and we are into
questions we do not revert back to that. But certainly your
statement will be made a part of the record. We will recognize
you for questions at this time.
OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM THE
STATE OF ALASKA
Senator Murkowski. Thank you. I appreciate the opportunity
to submit my opening statement for the record. I just want to
state my very sincere and genuine appreciation to you, Mr.
Sampson, and all the efforts that EDA has made in Alaska. I
think we recognize in Alaska we really are seeing true
investment coming out of EDA. We have had a chance to talk
about some of the projects. We have a dry dock in Ketchikan, we
have an all tides dock in Dillingham, and both are huge
investments in very small communities. As you know, in these
depressed communities where oftentimes there is only one real
economy, this is an effort to really expand on the economy and
we are seeing those efforts.
The conversation up at the table here has been focused on
how you are making an impact in those industrial or
manufacturing jobs. I would like to hear your comments about
how you balance that with the needs in the rural areas,
creating these jobs and these opportunities in the rural parts
of the country. I would like to know that there is balance as
you weigh these projects and your investments.
Mr. Sampson. Senator Murkowski, that is a very important
dimension of our overall management of our portfolio of
economic development grants. Over the last 3 years of my
stewardship of the Economic Development Administration, 56
percent of our grants have gone to rural areas, 38.7 percent
have gone to urban areas. I know that does not add up to 100
percent. The other 6 percent roughly have been either statewide
grants or they have been national technical assistance grants.
That is an average or a split of our portfolio that has been
consistent historically. As of April 24 of this year, we have
awarded 34 rural public works investments totally $40.2
million, and 20 urban investments for $34 million. So we take
that management very seriously.
Our goal is not to penalize the rural and remote regions,
but it is rather to help rural and remote regions plug into a
growing national economy and to develop strategies that they
can link into the growing State economies. Some of the research
that we have funded over the last 3 years, and I believe just
this week we posted a ground-breaking new national research
grant on rural economic development strategies that was
completed for us by Professor Michael Porter, one of the
leading thinkers and practitioners in competitiveness and
cluster development anywhere in the world, on how rural areas
can better develop their economies by linking into broader
regional economies. That is something that we are very focused
on and that we are committed to. We are committed to working
with our partners at the Department Agriculture and Rural
Development, where there are billions of dollars in grants
available, to really ensure that there is an integrated focus
on rural economic development strategies.
Senator Murkowski. So as you are evaluating where you go
and how you go within the regions, are you taking specific
steps to encourage programs in these rural areas in non-
traditional projects as opposed to the bricks and mortar type
of an approach that you would see in the urban areas?
Mr. Sampson. That is certainly our desire. I have made it a
point during my leadership of EDA to spend a significant amount
of time rural America. As a matter of fact, I have been called
the ``Captain Kirk'' of the Commerce Department because I have
boldly gone where no Assistant Secretary of Commerce has gone
before. I can assure you the places I go to in rural America
you do not fly into, you spend a lot of time in cars. But we
believe that is important.
We are holding 20 economic development forums around the
country this year specifically focused on rural economic
development strategies and we have held those forums in rural
America. We have not gone necessarily to the major metropolitan
area in those States. We have gone into the more remote places,
like Millinocket, ME, in the middle of January, and places like
that to deal directly with the economic development
practitioners who are on the ground there.
Senator Murkowski. I appreciate your efforts in our rural
areas. You will not be able to drive to them, but we will fly
you out and keep you there for a while. Thank you.
[The prepared statement of Senator Murkowski follows:]
Statement of Senator Lisa Murkowski, U.S. Senator from the
State of Alaska
Mr. Chairman, thank you for moving forward with this hearing, and I
would like also to offer my thanks to Dr. Sampson and the other
witnesses for appearing today.
I am pleased to have an opportunity to make sure that my strong
support for the reauthorization of the Economic Development
Administration (EDA) goes on the record. I sincerely hope that this
important reauthorization measure does not become hostage to other
issues and will progress briskly from here to the floor.
Along with many of my fiscally conservative colleagues, I am
concerned about the appropriate role for the Federal Government in
encouraging private industry. I believe industry is healthiest when it
does as much as possible for itself.
However, after carefully watching the activities of the EDA in my
State of Alaska, I have been very positively impressed. Mr. Chairman,
the dollars disbursed by the EDA are not going to waste. They are
building economic capacity so that the private sector can step in to
provide real, long-lasting economic activity and employment. That is
absolutely vital in a State like mine, which continues to lag far
behind most others in the kinds of infrastructure that make a vibrant
economy possible.
Quite frankly, Mr. Chairman, many times Federal funds are committed
for projects that are quick shots in the arm but product no lasting
impact. EDA projects are linked to private sector job growth. As such
they are both different and deserving of our support.
In Ketchikan, for example, we have a shipyard capable of doing
almost any job on vessels up to and including our own marine ferries,
Coast Guard cutters and NOAA research ships. This yard has an exemplary
reputation for high quality workmanship, it has won high praise from
almost all its clients, and it is capable of providing upwards of 200
highly skilled, well-paid, year-round private sector jobs in a local
economy that was shattered by the loss of the timber industry and where
seasonal fishing and tourism just can't carry the whole load.
Unfortunately, it has one problem--although it can DO the work, it
cannot ACCEPT all the work it is offered, because when its drydock is
in use by one vessel, it cannot move any other vessel into an area
where work can be done. EDA is helping solve that problem by supporting
the construction of facilities that will allow it to accept additional
work--and provide additional jobs.
Another example occurs in Dillingham, a relative remote community
in Alaska's Bristol Bay region. For years, all goods delivered to
Dillingham and through Dillingham to nearby villages have had to arrive
in shallow-draft barges, from which the goods are transferred to other,
smaller vessels before coming ashore. The reason is that Dillingham has
lacked a dock structure that will support larger vessels at all tide
conditions. What it means is that every item that comes into the region
arrives at a higher price because of increased shipping costs, and
every item shipped out of the region is sold at a lower profit margin
for the same reason. EDA is changing that by helping the region build a
dock suitable for use anytime.
These two simple projects, for very modest amounts of money, are
making new economic development in those communities not just possible,
but probable--and that is no small thing.
In short, Mr. Chairman, I consider the programs of the EDA to be an
``investment'' in the very best sense of the word.
In the interests of time, I won't go into detail on other aspects
of the reauthorization except to note that the EDA's involvement in
economic adjustment grants and trade assistance programs are also very
important both to many communities.
I do, however, want to mention one other requested change that has
my strong support. The Administration has suggested the inclusion of a
provision regarding ``Special Impact Areas,'' which would allow the
Secretary to waive certain requirements for assistance in the event
there is a finding that a grant or technical assistance will fulfill a
pressing need and be useful in easing excessive unemployment.
Mr. Chairman, I don't anticipate this provision would be abused,
and I think it would be very important for the most economically
depressed areas where the regular process may be difficult to
accommodate. I, for one, would like to see it included in the bill we
send forward.
Finally, Mr. Chairman, I want to note my support for authorizing
full funding for the EDA at the requested level. We on this committee
will not actually be providing appropriations, but it is nonetheless
important that we provide this support, so as to ensure maximum
flexibility for those who will.
Thank you Mr. Chairman. I look forward to hearing from our
witnesses.
Senator Inhofe. Thank you, Senator Murkowski.
Senator Wyden.
Senator Wyden. Thank you very much, Mr. Chairman. Mr.
Sampson, let me review where we are with respect to economic
development. I think, first, everybody understands that it is
important for towns to generate private sector involvement. It
is just crystal clear that that is important. During the
Clinton administration, they began an effort to sort of monitor
that effort, as you announced in your testimony, and that was a
constructive step by the Clinton administration as well. You
all then come in in 2003 and come up with this so-called goal
of the little towns having $20 of private sector money to get
$1 of help from EDA. Then we go to the new so-called goal of
$22-to-$1. As I have told you, my small towns are just up in
arms about it. What is especially troubling to them is that
they say they were not consulted. We have heard from the small
towns in Oregon who work with your Agency and love working with
your Agency that nobody consulted with them before this new so-
called goal of $22 private sector dollars before you got $1
from EDA. What would be your response to them on the question
of whether you consulted with them before you put in place this
new, as I call it, so-called goal?
Mr. Sampson. Senator Wyden, I believe that we have had the
greatest degree of collaboration with our partners around the
country in many years at EDA. We have met with each of our
regional offices around the country, I have discussed our
funding priorities from day one when I arrived, I have
discussed the investment policy guidelines that we have
developed over the course of the last 3 years. In virtually
every speech that I have given out there I make myself
available for questions, for dialog as I meet with economic
development practitioners, economic development districts
around the country. We have held economic development forums in
Oregon where I laid out all of these policies and goals. So I
think we have provided ample opportunity for dialog and
discussion of the direction that we go. But ultimately, I
believe that my responsibility as the leader for EDA, in
consultation with Secretary Evans, is to set the policy
guidance and direction that ensures the best stewardship of
these taxpayer dollars.
Senator Wyden. Well, tell me then how you came up with the
figure of $22 private sector to $1 from EDA? Let me make it
clear, the people that are on the ground in Oregon feel that
you did not consult with them. Maybe you had some conferences,
maybe you gave some speeches. I am just telling you that is how
they see it. These are people who like your Agency. These are
not people who are opposed to your Agency. So that is No. 1.
But, No. 2, tell me how this figure was arrived at. Why not $9,
or $31, or--how did you get the figure that you had to generate
$22 private sector dollars?
Mr. Sampson. First of all, as I mentioned earlier, the GPRA
measures that we started to collect in 1998 tracking private
sector investment and private sector leverage has been a part
of the evaluation of grant proposals ever since that period of
time. It may have been before but the numbers were not tracked
then. The GPRA measures in 1998 were $9-to-$1. So that was the
baseline from which we started.
As we faced decreasing budgets appropriated by Congress, we
believe that it is our responsibility to try to achieve the
maximum economic impact for those decreasing Federal dollars
and so we began to look at increasing competition for EDA
dollars. There are more grant applications coming into us than
what we have dollars to fund. So we began looking at regional
economic impact, looking for drivers of regional economic
growth, not focused so much on small one-of-type projects like
landscaping main street, but looking for those kinds of
projects that are going to drive regional economic growth.
Before I arrived up here, I met with a number of equity
fund managers that manage equity funds or VC funds that
specifically do business in urban areas, inner-city areas, or
economically distressed areas where they are really focused on
a triple bottom line as opposed to just a single bottom line of
return on investment. I asked them what kind of return on
investment are you looking at. The numbers that I got were far
higher than $20-to-$1. So in consultation with our regional
directors of our six regional offices, we settled on a $20-to-
$1 ratio as our goal.
The reality on the ground is that last year we actually
achieved a $28-to-$1 ratio, which was far in excess of our
goal. So as we set goals for this year, we did what we think
any good manager does, we increased that ratio by a modest 10
percent. As I mentioned earlier, when you look at the split
between rural and urban, even though we set that $20-to-$1
goal, we still achieved that historic rural-urban balance.
Senator Inhofe. The time has expired.
Senator Allard, do you have questions?
OPENING STATEMENT OF HON. WAYNE ALLARD, U.S. SENATOR FROM THE
STATE OF COLORADO
Senator Allard. Yes, Mr. Chairman, and I also have a
statement I would like to make part of the record.
Senator Inhofe. We have a policy, and I explained that to
Senator Murkowski, that once our opening statements are made
and we go to questions, we do not revert back to opening
statements, unless you want to make it using your question
time.
Senator Allard. I would just like to have mine put in the
record.
Senator Inhofe. Without objection.
[The prepared statement of Senator Allard follows:]
Statement of Senator Wayne Allard, U.S. Senator from the
State of Colorado
Mr. Chairman, thank you for holding this hearing. As someone who is
a Member of both the Banking and the Armed Services Committees in
addition to this committee, I have a great interest in the work that
the Economic Development Administration does. The Economic Development
Administration does important work in many economic sectors throughout
the county in communities large and small.
As we are aware, the House has already passed a bill reauthorizing
the Economic Development Administration. There are some positive
changes in that bill, but there are also portions that deserve a second
look. That is at least part of what we are doing here today.
The Economic Development Administration is in charge of a budget of
around $300 million. While that is a lot of money to pretty much every
individual person in this room, it is quite a small amount in the
scheme of the entire Federal budget. However, even with such a modest
investment, the EDA is able to leverage many times over that amount in
private funds with every dollar that they spend. I think that deserves
praise.
As a Member of the Banking Committee, and the Chairman of the
Subcommittee on Housing and Mass Transit, I get to see a lot of
projects that aim to bring about redevelopment in communities around
the country. The projects that are most successful are those that bring
Federal and private funds together. There will never be enough Federal
dollars to fund every project that someone deems worthy, by bringing in
private funds which, in turn, guarantee private sector involvement, the
EDA is setting communities and organizations with partners that help
them to succeed on their own. The need for perpetual Federal funding is
just not there with this kind of arrangement.
Mr. Chairman, again I thank you for bringing the EDA, and the
projects that they help fund, to the forefront of the committee's
attention. After reviewing the witness testimony I look forward to a
productive discussion on the issue of why and how the Economic
Development Administration's reauthorization will move forward.
Senator Allard. Thank you. Your budget is one of the few
budgets that does not get earmarked during the congressional
appropriation process. Would you talk a little bit about how
this affects your ability on spending the money that Congress
sends to you.
Mr. Sampson. Well, we believe that we are very fortunate in
that we have not had earmarks historically. We believe that
what that enables us to do is to be responsive to the economic
development organizations and the communities around the
country and respond to their needs on a competitive basis and
ensure that the grants that are awarded are truly grants that
score well on a competitive process. We certainly hope that
moving forward our appropriations will not be earmarked.
Senator Allard. You have public-private partnerships that
you work with. Has this been working out satisfactorily with
you?
Mr. Sampson. I guess that depends somewhat on who you
listen to around this table this morning. But, yes, I believe
that our private-public partnerships are working well. We think
we have demonstrated an ability to significantly crowd in or
attract significant private sector money for every dollar of
Federal appropriation that goes out--a $28-to-$1 ratio last
fiscal year.
Senator Allard. We have a nuclear site in Colorado that is
in a cleanup stage right now and getting close to termination.
But with the private contractor and cleanup there has been
incentives built into the contract where there was a reward for
getting the project done ahead of schedule and doing various
desirable things like keeping the injury rate down low and that
kind of thing. Do you have performance-driven contracts that
you work with in trying to get that accomplished, because this
has worked so well in Colorado. We are one of the few States
that has actually had some cleanup occur as far our nuclear
sites are concerned, with the sites ahead of schedule and under
budget. Do you try and utilize this process in your projects?
Mr. Sampson. We certainly do. In the Administration's bill,
we have proposed a transferable performance credit that would
reward the grant recipient if they met or exceeded a number of
performance measures, including coming in on time, under budget
with their economic development expectations met or exceeded.
In negotiations with the House, what emerged were three
performance awards. One, an award for under-cost underruns,
where the grant recipient could keep the underrun and use it to
enhance the project. The second is a performance award where if
they meet or exceed the private sector leverage or job creation
projections, they are eligible for up to a 10 percent award on
the project cost. And then the third element of the award was
for a planning performance reward, moving away from a passive
process-oriented award to a reward for planning districts who
actually have projects that are not just planned but are
actually implemented and then meet or exceed their
expectations. So we have three performance awards in the House-
passed version.
Senator Allard. One of the issues happening in Armed
Services Committee is BRAC. Could you discuss some of the
successes and perhaps some of the difficulties that EDA has
encountered during these projects? We have a BRAC situation in
Colorado and it has had some problems and other parts of it
have done very well. So I would like to have you talk just a
little bit about that.
Mr. Sampson. I think that we have learned a great deal in
terms of how to take former military bases and return them to
productive use. There have been a number of very successful
bases around the country that have been converted; Pease Air
Force Base in New Hampshire and Kelly Air Force Base in San
Antonio. Perhaps one of the greatest success stories anywhere
is the former Fitzsimmons Army Medical Center right in Aurora,
CO, where they have now successfully attracted already $1.3
billion of new private sector investment onto that base. It is
a magnificent redevelopment. It is not primarily a land
development, it is a cluster development, a biotechnology
cluster that has been developed there. As a matter of fact,
Senator, I was so impressed with that project that I hired away
the executive director of the Fitzsimmons Reuse Authority who
is now our regional director for our Denver Regional Office and
he will be an extremely valuable resource for EDA as we move
forward into the next round of base realignment and closure.
Senator Allard. I see my time is running out. Just briefly,
Mr. Chairman, one last comment on GPRA, the Government Results
and Performance Act. I think this is really important and if
you are not in conformance with the GPRA law and everything
that we have passed, I hope that you would look at making sure
that is implemented. I think about 60 percent of the Agencies
in the Government are now considered in compliance with GPRA or
close to it. I hope that you can set these parameters, measure
results, because I think it is very beneficial to committee
members as well as people in the Administration like yourself.
So I would encourage that you use that.
Mr. Sampson. Senator, not only do we take it seriously and
are in compliance, but we view GPRA as a floor and not the
ceiling for our performance measures. It is the basic
performance measure requirements. But our goal is to develop
performance measures that are even more rigorous than GPRA.
Senator Inhofe. Senator Clinton.
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
FROM THE STATE OF NEW YORK
Senator Clinton. Thank you, Mr. Chairman. I, too, would
like to submit my opening statement for the record.
Senator Inhofe. Without objection.
[The prepared statement of Senator Clinton follows:]
Statement of Senator Hillary Rodham Clinton, U.S. Senator from the
State of New York
Thank you, Mr. Chairman for holding this important hearing. I
strongly support reauthorization of the Economic Development
Administration. I think we can all agree that economic development and
the job creation that goes with it has to be one of our top priorities.
It is certainly a high priority for me, particularly with respect
to upstate New York. We are losing manufacturing jobs in upstate New
York, as I know is happening in many other parts of the country. And
while job creation has to occur in the private sector, the Federal
Government can and should play a role in spurring job creation.
In the case of the EDA, its mission since being established in 1965
has been to help economically distressed areas address conditions of
substantial and persistent unemployment. While many economic conditions
have changed in the intervening 40 years, that core mission remains
relevant today.
I think that EDA is doing a good job with the resources that we
provide them. In the last 10 years alone, EDA has funded 280 projects
in New York State. I want to mention just a few examples.
In fiscal year 2003, EDA provided $2.8 million to support the 72-
acre Cornell Agriculture & Food Technology Park in Geneva, New York.
Cornell broke ground on that project just a couple of weeks ago. This
will help companies to carry out cutting edge research in food,
agriculture and bio-based technologies, and will existing research and
extension programs of the New York State Agricultural Experiment
Station and Cornell University.
In Rome, New York, EDA has put four rounds of funding to assist in
the conversion to civilian uses the former Griffiss Air Force Base
property. These grants have helped attract private funding for the
Griffiss Business and Technology Park, which has helped retain and
develop more than 3,000 jobs.
And in 2002, EDA provided $3 million in funding to the Essex County
Industrial Development Agency for infrastructure work related to the
development of the Chesterfield Commerce Park. EDA's investment will
leverage private investment, and will help lead to the creation of 200
new jobs.
So I know that EDA can be helpful.
I note that in his testimony, Dr. Sampson states that EDA's mission
today is to lead the Federal economic development agenda by promoting
innovation and competitiveness, preparing American regions for growth
and success in the worldwide economy.
This is certainly no small task. And while EDA can only be a
catalyst for public sector development, I strongly believe that current
funding levels are totally inadequate.
In fiscal year 2004, we appropriated $318 million for EDA, and the
Administration has requested a similar amount for fiscal year 2005.
This is simply not enough, and I hope that we can work together in this
committee to increase the funding for EDA.
I also look forward to working with Chairman Inhofe, Senator
Jeffords and other members of the committee as we move toward markup on
several proposals that I have been working on, such as new ways to
promote business incubators, training, and entrepreneurship.
Senator Clinton. I strongly support reauthorizing the EDA.
I appreciate the work that you have done in New York over so
many years because, as with many of my colleagues, part of my
State has been very hard hit by the loss of manufacturing jobs,
mostly up-state. There is a proposal currently pending at EDA,
submitted by the Rochester Institute of Technology, applying
for a $300,000 grant for the Roadmap Project, which is a
project focused on analyzing 10 manufacturing clusters in New
York to develop a roadmap to enhance competitiveness for
manufacturing and attraction of private sector investment. This
is a very important project. RIT is a first-class institutions
with the intellectual brain power to really make a significant
difference in the State. Can you inform me about the status of
this particular grant application, Mr. Sampson?
Mr. Sampson. Senator Clinton, I am very pleased to be able
to tell you that that grant has been processed. It will be on
my desk by the end of the week for me to sign and prepared to
be announced. It is a model example of what we are looking for
in economic development projects. No. 1, it is regional in
nature and scope; No. 2, it focuses on developing industry
clusters; and No. 3, it is a university-led economic
development strategy. So it is a model example of what we are
trying to give priority to around the country.
I will tell you in the way of how it has worked through the
process, I believe, as you are familiar with, that money was
actually appropriated to the Office of Economic Adjustment at
the Pentagon, then transferred to us. As a result of the delay
in getting an appropriation for Commerce this year and being in
the Omnibus--and then we faced three recisions after the
Omnibus was passed--we got our allotment in three different
crunches of funds that were released, we were not able to
process all of the grants as early in the fiscal year as we
would normally like to do. But that grant has completed its
processing and I will be signing that grant this week.
Senator Clinton. I am very, very glad to hear that. I agree
with you, I think it is a model project that I hope has
implications not only for other parts of my State but other
States as well.
I also wanted to inquire about the status of work that
Congressman Walsh and I have been doing with respect to the
workers laid off at Carrier. As you know, Carrier Air
Conditioning laid off 1,200 workers in the Syracuse area and
moved them to the far East, even though it was a profitable
plant, which caused a lot of angst because they kept doing
everything they could to enhance profitability and nevertheless
those jobs were lost. Congressman Walsh and I have worked hard
to try to figure out how to fill the hole left by this
announcement. I know that the Congressman convened a meeting to
get EDA's assistance to develop a comprehensive, coordinated
plan to reuse the potentially available space at the Carrier
campus. It is my understanding that local officials are working
on the final details to submit that proposal to EDA and that
Congressman Walsh has received commitments that the proposal
would receive a very high priority. So I just want to publicly
reinforce the importance that Congressman Walsh and I place on
this and ask if I can get the assurance that it will receive
the high priority attention that we think it merits.
Mr. Sampson. Senator, I have been to Syracuse and met with
State and local officials, I have met with the labor leaders
that were there. We had a very extensive discussion about the
challenges that community faces. I brought with me my regional
director that serves New York who operates out of Philadelphia,
had our economic development representative for New York who
was there at that meeting as well. I made very clear to my
staff that this was a very high priority issue. Further,
Secretary Evans has directed EDA to give high priority to all
of our grant applications to those communities that have been
impacted by manufacturing job loss. So I can give you my
personal assurance that that will receive high priority
consideration.
Senator Clinton. I appreciate that very much. Finally, Mr.
Sampson, the whole question about outsourcing, off-shoring,
whatever we want to call it, I think many of our companies are
missing the opportunities in low-cost rural areas throughout
our country. I know Senator Murkowski asked about rural areas.
When you take into account the full cost of off-shoring, there
is an article in I think it is The New York Times this morning
talking about there are lots of hidden problems and costs that
businesses are only now recognizing--customer relations
problems, monitoring problems, depth of knowledge and
experience challenges. Many rural areas could be great
competitors to keep these businesses in America but right now
they do not have the infrastructure. They do not have the fiber
optic communications, the office parks, the trained work force
clustered sufficiently to be a viable competitor.
I think it would be very helpful for EDA to make a special
effort to look at call centers and back office processing. I
predict that many of our companies that have made these moves
in this particular sector are going to be having second
thoughts. Therefore, we need our rural areas, whether it is
Colorado, Missouri, Oklahoma, Vermont, New York, to be better
positioned so that we basically can compete for in-shoring, so
we can tell people in New York or Chicago or Los Angeles you do
not need to go off-shore to another country, you can come to
the rural areas of this country, we have the assets that you
need.
So I would ask that perhaps I could work with you and your
colleagues and my colleagues to try to figure out if there is
some special way that we could get positioned for this in the
next several years so that we stop the flow of jobs overseas
and we actually are competitive enough so that when the tide
turns, which I think it will for security reasons and so much
else, we have the assets ready to take those jobs and be
competitive here at home.
Mr. Sampson. Senator, I can tell you that we believe that
making telecommunications, broadband infrastructure available
in rural areas is certainly a high priority for us. Last week I
was in New Mexico where we announced a major point of presence
grant there that will serve the entire State of New Mexico. We
have a grant that is in processing right now that will serve
very rural areas of Virginia, Kentucky, and North Carolina in a
partnership. We believe that is a high priority for us.
Further, I would just say that in the Agriculture bill that was
passed I guess the last session there was a significant amount
of money that was included in that for deployment of broadband
technology in rural areas. I think this is another example
where we need to work very closely with Agriculture and
Economic Development close together.
Senator Inhofe. Thank you, Dr. Sampson. We are not going to
have a second round. However, if any of the members have a very
high anxiety level for one more minute, we would cooperate with
that.
Senator Bond. One high anxiety minute. I commend you on
having the $22-to-$1 ratio that you have been able to achieve.
I think that is great for banks and private investors. But I
would look forward to discussing with you and your staff
whether that means that some of the really poor or distressed
areas might be shut out. This has been raised by Senator Wyden
and others. It may be the social investment may be great even
though you cannot meet that $22-to-$1 private investment. I
hope that does not become an albatross and drive you from the
poorer to the wealthier but still needy areas.
Senator Clinton. Mr. Chairman, could I just add on to
Senator Bond's point?
Senator Inhofe. Surely.
Senator Clinton. It might be very useful if EDA could give
us some breakdown of exactly how that ratio is reached. I think
that the Senator from Missouri is right on target, that in some
areas that is a ratio that probably not only can be met but
exceeded, which then raises the average, when we know that when
we are talking about poor or distressed communities, at least a
lot of the places I represent in up-state New York, they could
never meet that kind of requirement. But we do projects all
over the State that have merit and that raises the average. So
I think it would be useful to get a breakdown of this
information as to how the $22 and $28 figures actually were
arrived at.
Senator Inhofe. Thank you, Senator. We did discuss that
earlier on in this meeting. Of course, we reemphasize that is a
goal, not a rule.
With that, I would just say to you, Secretary Sampson, that
you have done a great job. In the OMB performance assessment, I
think you are among the highest, if not the highest, of all
these bureaucracies that we have around here. They even
recommended a higher budget, which is most unusual. So let me
just congratulate you on the fine job you are doing.
Mr. Sampson. Thank you, Mr. Chairman.
Senator Jeffords. I would like to join in your accolades.
You are doing a fantastic job.
Mr. Sampson. Thank you, Senator Jeffords.
Senator Inhofe. We will now move to the second panel.
The next panel consists of Mr. Gary Gorshing from southwest
Oklahoma, Mr. Jim Saudade from Vermont, Mr. Charles Gatson, and
Phillip Singerman. Dr. Singerman, we would be very interested
in any comments you may make on any of these things. Since you
are the predecessor in the job of Dr. Sampson, you might have
comments to make during the course of your presentation
relating to how you view things from your perspective.
We will start with Mr. Gorshing. Because of the late hour,
I would like to ask you to confine your remarks to 5 minutes
and then we will have a round of questioning. Your entire
statements will be made a part of the record.
STATEMENT OF GARY GORSHING, PRESIDENT, NATIONAL ASSOCIATION OF
DEVELOPMENT ORGANIZATIONS
Mr. Gorshing. Good morning, Mr. Chairman and members of the
committee. My name is Gary Gorshing. I am the current president
of the National Association of Development Organizations, and
the executive director of the South Western Oklahoma
Development Authority, an EDA-designated economic development
district headquartered in Burns Flat. Thank you for the honor
and the opportunity to testify today in support of the work and
achievements of the Economic Development Administration. We
have submitted a lengthy and detailed statement for the record,
so I will be brief.
Mr. Chairman, the members of NADO believe there are four
major reasons for Congress to support a multi-year
reauthorization of EDA. The Association and its members make
these recommendations with observations in more than 35 years
of experience with Federal community and economic development
programs including EDA. I would also like to mention that NADO
is a member of the Coalition for Economic Development.
First, Mr. Chairman, EDA has a clearly defined role within
the broad portfolio of Federal economic development programs.
As the only Federal Agency focused solely on private sector job
growth, EDA is a vital resource for distressed communities.
Through its diverse portfolio of programs, the Agency has the
flexibility to meet the needs of local communities. This
applies from a programmatic standpoint where EDA has resources
for strategic planning, infrastructure improvements, business
investment capital, and technical assistance. It also applies
from a community standpoint, whether a locality is struggling
with long standing poverty, declines in traditional industries
such as coal, timber, or fisheries, or even if a community is
impacted by a natural disaster, a military base closing, or a
manufacturing plant closing.
My second point is that the EDA planning program for multi-
county economic development districts is proven and cost-
effective resource for our Nation's distressed communities. As
reported in a 2002 program evaluation by Wayne State
University, the national network of 320 regional development
districts ``provides the critical backbone for economic
development planning at the local level.'' Therefore, we
specifically urge the committee to retain the leadership role
of the districts at the multi-county and local levels. This
involves both the crafting and, most importantly, the
implementation of regional roadmaps for economic growth and
sustainability. It is important to note that the EDA planning
program is far more than simply developing strategic economic
development plans for a region. It also involves providing
hands-on technical assistance to local government officials and
business leaders in our regions. Without the flexibility and
expertise of the EDA planning districts, most of our local
communities would lack the capacity to package infrastructure
and development deals.
My third point is that the EDA public works program is
essential and cost-effective. It is a primary resource for
distressed communities who are striving to develop the most
basic building block for economic development--the public
infrastructure. In my home region of Oklahoma, EDA has made
several valuable investments. In 1992, for example, the city of
Clinton received EDA assistance to meet an overwhelming need
for improved sewer treatment infrastructure. Without the
assistance of EDA, it is most certain that the BAR-S Company, a
major local employer, would have been forced to close its plant
in Clinton, with the loss of approximately 400 jobs. As part of
any EDA reauthorization package, we encourage the committee to
maintain fair and flexible eligibility criteria for public
works grants. Over the years, the success of EDA has been
rooted in its bottom-up approach. The projects originate from a
local planning process, with EDA coming into the process later
as a key catalyst. The bottom line is that most impoverished
communities, especially small town and rural America, would
struggle by themselves to build the infrastructure and
facilities required to support new and expanding businesses
without the EDA public works program.
My fourth and final point, Mr. Chairman, is that the EDA
Revolving Loan Fund program is a powerful tool for addressing
the credit gaps that exist in many underserved communities,
especially rural areas. The participation of locally controlled
EDA RLFs in a business deal usually encourages once-reluctant
banks to participate in the project. EDA RLFs are a vital
source of capital in areas underserved by traditional lending
institutions. You will note that I included numerous examples
in my written statement of the success and power of the RLF
program.
Mr. Chairman, we generally support the modifications made
in the House bill to the RLF program, including a provision
allowing local RLF grantees to consolidate their funds. We
would like to see Congress allow the defederalization of RLFs,
meaning that all of the funds would become local or nonfederal
after the money has been loaned out and fully revolved.
I see my time is up. Thank you.
Senator Inhofe. Thank you, Mr. Gorshing, for a very timely
and excellent opening statement.
Mr. Saudade, you are recognized.
STATEMENT OF JAMES J. SAUDADE, DEPUTY COMMISSIONER, DEPARTMENT
OF HOUSING AND COMMUNITY AFFAIRS, STATE OF VERMONT
Mr. Saudade. Good morning, and thank you for the
opportunity to provide testimony to the committee this morning.
I am really glad to hear the Senator remind folks around here
that Vermont is a very small State that is facing substantial
economic challenges. The median income for a family of four in
Vermont grew only about $500 from 1989 to 1998. Our poverty
level actually increased during that period from 8.1 to 9.6
percent. While our statewide unemployment averages below the
national average, Vermont hosts regions of high unemployment
such as our Northeast Kingdom and substantial underemployment
is pervasive throughout Vermont.
To address these disturbing trends, we have undertaken
economic development planning and projects to stimulate new
businesses, train workers, and grow the businesses we have. In
this effort, we have enlisted the assistance of EDA as our
partners to help underwrite the cost of new infrastructure,
capitalize Revolving Loan Funds, and build small business
facilities. In fact, Mr. Chairman, as we are meeting here this
morning, the ribbon is being cut on a new business facility in
St. Johnsbury, VT, one of our most economically distressed
areas. This center, which is largely underwritten with EDA
funds, resides in an industrial park that was originally
established with EDA assistance and also expanded with EDA
assistance.
I actually helped to establish the business incubator in
Randolph, VT, that Senator Jeffords and Dr. Sampson visited
last year. That will open in a couple of months and provide
much needed jobs to a community that was devastated by a series
of fires and has suffered recent plant closures. Both the
Randolph and the St. Johnsbury projects were planned and
executed in accordance with comprehensive economic development
strategies, CEDS, as they are known to us. These CEDS are a
requirement for participation in EDA activities and are a
planning feature which I, and the Agency that I represent today
for the State of Vermont, strongly endorse. The process to
complete these plans is arduous, time consuming, and not
without cost, but their value for smart development is
indispensable.
This week, perhaps even as we are meeting right here, our
State's legislature is considering changes to our limited
liability program for brownfields reclamation. I believe the
improvements in these laws will result in a watershed of new
interest in brownfield reclamation. With over 2,000 brownfields
in Vermont, as Senator Jeffords noted, we will need the help of
EPA and EDA to remediate and reuse those sites.
Vermont is a rural State by character and it is very
different than urbanized areas of this country. As such, we
sometimes find ourselves working within constructs of the
Federal Government that do not work quite as well as they might
in more populated States. This is true with EDA. We recommend
that EDA allow some discretion in the design and implementation
of its programs to absorb inherent differences that exist
across the country, and particularly in small States.
I am very glad to hear this morning that the $22-to-$1
ratio is a goal that is not necessarily shared by everyone in
all regions because, I can tell you, it is unattainable in
Vermont and would threaten to make EDA an anachronism in our
State.
Also characteristic of very rural States is a lack of
professional staff for small communities. EDA relies heavily on
regional representatives to provide technical assistance. These
EDRs, as they are known, are responsible for large geographic
areas that prohibit frequent visits and limit accessibility.
This dependence on very few individuals to provide both
technical assistance and firewall review of new proposals for a
huge area does not do justice to the otherwise well thought out
EDA system of resource deployment.
We would also appreciate an improved EDA application
process that did not place project viability in the hands of
one person initially, and also allowed for the capture of time
sensitive and unusual, but creative projects. The existing
application process is multi-tiered and cumbersome. We
recommend a special review process for applicants that can
demonstrate a need for an extraordinary procedure. We might
also suggest a closer partnership with EDA field
representatives to State community development departments. In
Vermont, as is the case in many States, development department
staff have become proficient in the review and administration
of CDBG small cities projects and may offer EDA some assistance
in extending field capacity and offering field support to EDA.
In conclusion, we enthusiastically recommend
reauthorization of EDA. While we recommend some flexibility and
discretion in applying program standards to small States, EDA's
major program features are sound, its products are invaluable,
and Vermont's economic distress would become further
exacerbated without EDA support.
Senator Inhofe. Thank you, Mr. Saudade.
Mr. Gatson.
STATEMENT OF R. CHARLES GATSON, VICE PRESIDENT AND CHIEF
OPERATING OFFICER, SWOPE COMMUNITY BUILDERS
Mr. Gatson. Mr. Chairman, Senator Jeffords, and members of
the committee, thank you for inviting me to testify in front of
your committee on the EDA reauthorization bill. I want to
particularly recognize Senator Bond who has been a friend and a
champion of our efforts to improve the lives of thousands of
folks living in Kansas City, MO.
I am currently vice president/chief operating officer of
Swope Community Builders, a position I have held for the past
13 years. Swope Community Builders is one of the Nation's 3,600
community based development organizations represented by the
National Congress for Community and Economic Development. We
are a nonprofit community development corporation with a $7.5
million annual budget. On December 31, 1991, our total assets
were approximately $60,000. On December 31, 2003, our total
assets exceeded $61.4 million. We have completed in excess of
$120 million in development projects--single and multi-family
housing, as well as commercial and institution projects--over
the past 10 years. Every dollar the Federal Government invests
in our work leverages another $7 to $12. We manage more than
$100 million in investment. We have over $100 million of new
investments in our development pipeline.
One of our most important projects, the H&R Block
Technology Center, was completed in December 1999. This
project, a corporate technology center built using cutting edge
construction, cabling, and computer technology, relocated 150
employees earning an average of $45,000 per year from suburban
Kansas to Kansas City's urban core and created 400 full-time
equivalent jobs with starting salaries of $15 per hour. The
total annual payroll at the H&R Block Technology Center exceeds
$20 million.
Swope Community Builders is in the development phase of a
new project called the New Village at Technology Center, a
480,000 square foot office/warehouse project, accompanied by a
50,000 square feet in companion retail/service space and 175
units of work force and market rate housing. This will be a
$48.6 million project that will employ over 1,200 people.
None of the projects that we have done to date would have
been possible without Federal involvement. But the one Agency
missing from that list is the Economic Development
Administration. Despite our best efforts, Swope Community
Builders has never received any funding from the EDA. Indeed,
none of the 14 Community Development Corporations in Kansas
City has received substantial funding from the EDA in the past
16 years. It is not an isolated case. NCCED has surveyed our
membership nationwide and, with the exception of the western
region, none of the CDCs have had real good access to EDA.
We are in the pre-application stage of the New Village at
Technology Center, as I described earlier. It has been very
difficult to make that project work and it will not be able to
work without substantial up front cash from the Federal
Government. As mentioned before, the $22-to-$1 leveraging
factor for us just does not work. I hear people talking jobs,
leaving their communities. Our communities do not have jobs in
the first place. So to get investment at a $22-to-$1 ratio is
almost impossible for us, yet we have been successful using
other techniques and we would like to be able to access this
one.
I have 1 minute and 39 seconds left. It normally takes me
that much time to introduce myself. But I want to use part of
that other minute and a half to just basically talk about the
Senator from Missouri, who has been very instrumental in every
project that we have done for the last 13 or 14 years. He
understands how it works in urban areas. He understands how we
do what we do.
I am here today basically because he invited me to talk
about EDA. I do not pretend to be an expert about EDA. What I
am an expert on is taking dollars and leveraging them into
projects to create jobs in the urban core. Again, we have not
been successful with the EDA. We plan on being successful in
the future. But if you are going to have a $22-to-$1 leverage,
it is going to be very difficult for us. We would recommend,
however, maybe a special set aside for not-for-profits like us
that we could access on a national level. We would also like
you to take a look at special impact districts that could be
created to deal with projects specifically in the urban core.
We have also discovered from looking at rural opportunities for
our organization that it is no different. There is
disinvestment in rural communities, there is disinvestment in
urban communities. We feel that the EDA can help that
particularly with public infrastructure dollars. I will yield
my 22 seconds to the next speaker.
Senator Inhofe. Mr. Gatson, thank you very much. I will
pass on your complimentary comments to Senator Talent.
[Laughter.]
Mr. Gatson. Senator Talent is too new. He is just getting
here.
Senator Inhofe. Dr. Singerman.
STATEMENT OF PHILLIP A. SINGERMAN, EXECUTIVE DIRECTOR, MARYLAND
TECHNOLOGY DEVELOPMENT CORPORATION, ON BEHALF OF THE
INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL
Mr. Singerman. Mr. Chairman, members of the committee, I am
really honored to be invited to testify before you. I currently
serve as the executive director of the Maryland Technology
Development Corporation. More relevant to this proceeding, from
1995 to 1999 I served as Assistant Secretary of Commerce and in
that capacity was responsible for EDA when you reauthorized the
Agency in 1998. That was a milestone achievement of the
Congress, carried out in a bipartisan fashion, and I want to
congratulate you for that visionary action.
I also want to commend Assistant Secretary Sampson for his
leadership of the Agency. He and members of his staff have made
a special effort to reach out to me and my colleagues in the
local economic development community. I want to thank him for
these personal and professional courtesies.
I am also here today as a member of the board of director
of the International Economic Development Council, IEDC, which
is the leading association of 4,000 members serving economic
development professionals around the world. IEDC is holding its
2005 conference in St. Louis this September and we look forward
to seeing you there, Senator.
I have carefully reviewed both the House-passed legislation
and the Senate introduced Administration bills. I have attached
a set of policy recommendations provided by IEDC to my written
testimony. I just want to briefly highlight three points: No.
1, the importance of prompt passage of EDA reauthorization; No.
2, the importance of providing adequate funding authorization
levels; and No. 3, the importance of allowing more efficient
management of EDA's Revolving Loan Fund.
In 1998, I had the privilege of testifying before this
committee then chaired by the late Senator Chafee, joined at
that hearing by Senator Baucus, the Ranking Member, and Senator
Warner, the Subcommittee Chair. I was told afterwards that
during the hearing Senator Warner turned to his colleagues and
asked, ``Does everybody like this Agency?'' The answer then and
the answer now is, yes, because EDA, as members of this
committee have stated, is perhaps the most efficient and
effective Federal Agency to assist local economic development
communities and can play a significant role in addressing the
decline of manufacturing jobs.
I respectfully urge the committee to consider prompt
passage of the reauthorization prior to the August recess. Here
is why. This spring the Congress will be reviewing the
Administration's budgetary request for fiscal year 2005, and
this summer Agencies will be submitting their requests to the
Administration for fiscal year 2006 funding. In the normal give
and take of the budgetary process, an Agency that is not
reauthorized will suffer. To those who care about the ability
of EDA to provide critically needed support to our most
distressed communities, tardiness in reauthorization will limit
the Agency's competitiveness. I can talk about this at greater
length in the question period.
Second, it is essential that robust funding levels are
authorized. The House-passed legislation proposes an
authorization level of $400 million for fiscal year 2004,
rising annually to $500 million by fiscal year 2008. This
legislation provides Congress with the authorization
flexibility it needs to address unanticipated economic
difficulties. What we learned in the 1990's is that every
region in the country and nearly every community will
inevitably face sudden and severe economic distress--tornadoes
in Oklahoma, floods in Missouri, ice storms in Vermont,
closures of military bases and DOE facilities across the
country.
During the latter part of my tenure we were faced with
economic crises in the steel and textile industry, yet the lack
of sufficient authorization levels prevented an adequate
response to address these problems. The result was that funding
to communities suffering long term deterioration was taken away
and a pernicious competition among equally needy communities
was created. This new authorization language does not eliminate
the ultimate authority of Congress to make judgments about
budget priorities, but it does remove an artificial constraint
to your ability to exercise an appropriate level of
discretionary flexibility.
My final point, Mr. Chairman, relates to the Revolving Loan
Fund modifications, which have already been mentioned. Just let
me state briefly that modifications of this legislation will
eliminate an unnecessary and, frankly, unmanageable
administrative burden on EDA and its local partners. This is
really a very modest step. Defederalization of local loan
programs is already guaranteed by other Federal Agencies and
EDA already releases its interest in construction projects
after 20 years. So if this is applied to Revolving Loan Funds,
it will level the playing field. You should note that it would
only be carried out pursuant to formal regulations issued by
the Secretary and under the guidance of the Inspector General.
I think I used up my 22 seconds as well. Just let me thank
you again for the opportunity to testify before you.
Senator Inhofe. Thank you, Dr. Singerman. I will confine my
questions to Mr. Gorshing and Dr. Singerman since I am sure
that my colleagues from Vermont and Missouri will have
questions for the other two witnesses.
Mr. Gorshing, we in Oklahoma, or you are responsible for
using technology that I dare say is not used nationwide. I am
talking about your mapping with GIS and GPS. Do you have any
idea as to how many other States--are we ahead of the pack in
technology?
Mr. Gorshing. We like to brag we are, Senator.
Senator Inhofe. That is all the answer we need.
[Laughter.]
Senator Inhofe. I compliment you for that. I am not saying
this just to blow smoke at you, but you are doing such a great
job. We are doing a great job in Oklahoma. I am just so
appreciative of Dr. Sampson and his predecessor for all the
things that have taken place in Oklahoma. But of all the
programs that come to your mind, which one do you think would
serve best as a model? Could you single out one that has had
unusual success?
Mr. Gorshing. You mean a specific EDA investment?
Senator Inhofe. Yes.
Mr. Gorshing. There are a great many of them out there. I
can share with you one incident in a very small community which
certainly is not unique across the national landscape. But
there is the small town of Thomas, a population of 1,000, and
the city, because of its size and lack of resources, has no
management staff whatsoever. They had an opportunity in the
year 2000 for a new manufacturing company. We are losing
manufacturing jobs all over, so this was a great opportunity.
W.W. Manufacturing Company made cattle handling equipment--
loading chutes, temporary pens, et cetera. It was a $3 million
project. But EDA invested a public works grant of $500,000 to
the city's economic development authority in order to support
the infrastructure that was needed in terms of water and sewer.
The company itself invested $2 million into the project and the
differences were provided by a variety of State and Federal
funds. But it was a packaging project which the city clearly
had no capability of putting together. It was our economic
development staff, through our economic development planning
program, that was able to put that package together. Today,
that company has grown from about 8 or 10 employees to a little
over 80, and additional growth is in sight.
Senator Inhofe. That is great. I appreciate that very much,
and we appreciate very much your being here to testify.
Dr. Singerman, you said during your opening statement there
are a couple of things you would elaborate on. I will give you
that opportunity with the remainder of my time. I think you
have already covered your feelings on the $22-to-$1 issue, but
perhaps you could elaborate a little bit more on brownfields.
Mr. Singerman. Yes, Mr. Chairman, thank you. I concur with
Secretary Sampson's remarks. EDA's ability to provide flexible
funding focused on job creation is very important and to have
it entangled with a very complex set of legislation and
regulations that flow properly from the EPA and their approach
to brownfields would severely restrict EDA's ability to address
those communities and those problems. I had not thought about
this before, but Secretary's Sampson's comments about the
impact of future BRAC communities I think is very significant
because that will be a major issue coming before the Congress
and EDA's ability to assist those communities has been
historically very important.
Senator Inhofe. Specifically, how? What ideas do you have
on how you could assist someone after this BRAC round takes
place?
Mr. Singerman. Well, I believe you will need, as you did in
the earlier BRAC rounds, supplemental funding to address the
problems of those communities. EDA gets in pretty quickly right
after the Office of Economic Adjustment's planning grants and,
as Secretary Sampson mentioned in regard to some of the
communities in Colorado, I believe in Oklahoma as well, Texas,
providing flexible funding not just for construction projects
but for Revolving Loan Funds, and for planning, and for
training, and for the kinds of technology transfer projects
that you have mentioned, Mr. Chairman, and that Secretary
Sampson has mentioned, the ability to provide timely, flexible,
and adequate funding is really critical to be able to help the
communities affected by the BRAC process.
Senator Inhofe. Thank you very much, Dr. Singerman.
Senator Jeffords.
Senator Jeffords. Jim, pleased to have you here. I would
like to get your views on a couple of things here. What key
changes would you make to EDA's programs to improve your
working relationship with the Agency?
Mr. Saudade. I think that having one EDR, Economic
Development Representative that covers all of up-state New
York, all the State of Vermont, and all the State of New
Hampshire provides a unique challenge for anybody to try to
provide a reasonable level of service and technical assistance.
To me, I think we would like to help EDA through our community
development department at the State level to try to extend that
field capacity, provide support, maybe an initial level of
review on applications so that the EDR has a little bit more
assistance in the region closer to its constituents to provide
that assistance that is very much needed.
Senator Jeffords. Please elaborate on how EDA's planning
process could be improved.
Mr. Saudade. The CEDS is a terrific process in that it
enlists the planners, businessmen, bankers, and other
interested parties to take a sobering view of the economic
picture in a region, to take a look at its resources, and then
to come up with a solid plan for action. The problem with the
CEDS process in Vermont that we experienced is that it seems to
be geared to more of an urbanized environment. In Vermont, we
do not have lots of people that are closely aggregated that can
serve on boards and committees and can make a lot of meetings
and things of that nature. It is tough. We also do not have the
diversity representation that you might find in Philadelphia or
New York or some other cities. So it is very difficult for us
to assemble the type of committee that has been the model for
EDA.
What we did in Vermont was we took the boards of existing
regional planning commissions, three of those, and two regional
development corporations to assemble about 74 individuals that
were broadly representative of the region. However, this model
was simply very different than anything EDA had seen before.
So I would recommend flexibility and a higher level of
understanding that small States are not necessarily going to
have the type of constituencies and the type of organizations
that you would find in more urbanized and populated areas.
Senator Jeffords. As you know, Vermont historically was the
machine tool industry of the Nation. As a result of that, I
think we have a lot of brownfields. What problems does that
give to you in trying to find suitable sites for industries?
Mr. Saudade. Well, along our rivers where most of the
manufacturing originally started because of water power, we
have many, many, many of those sites, as you say. The machine
tool industry is just one of the many industries that
contributed to this problem.
We recently had a site that cost $800,000 to do the testing
and to write the corrective action plan for remediation, but it
only cost $300,000 to actually remediate it. That is still $1.1
million to get over the hurdle of one small spill. The reason
why we need EDA and EPA is EPA can help us with the testing and
the remediation, but the costs are so extreme in this spots
that EDA assistance can help us to underwrite and credit
enhance the redevelopment of those sites. A developer is not
going to arrive at a feasibility decision on a project that has
that kind of up front cost related to the brownfields problem.
However, I am optimistic because our brownfield legislation in
Vermont had a catch. Even if you did everything right, if there
was something found wrong at the end of the cleanup, even if it
was completely within the corrective action plan, the secretary
could make you do more. This left a blank check, basically,
wide open. Frankly, attorneys for our banks would not allow
anybody to get involved with such projects. We think that hole
is going to be plugged this week or next week in our
legislature and I think you are going to see a lot more people
excited about getting involved with brownfields. I am hoping
that EDA is going to be an important player along with EPA to
help us address those sites because they are critical to the
stability of our towns and our village centers, they are
important to the creation of jobs, and they help us to protect
our undeveloped countryside.
Senator Jeffords. Thank you. Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Jeffords.
Senator Bond.
Senator Bond. Thank you, Mr. Chairman. I guess Mr. Gatson
blew the cover, so I might as well tell you that he has an
extensive background in urban affairs and economic development,
more recently he is branching out from the great work he has
done with Swope Community Builders in Kansas City to work in
rural areas, and he was a recipient in 2002 of Fannie Mae
Foundation's Johnson Community Fellows Award for leading
development professionals. He is currently serving a 3-year
term on the Federal Reserve's Consumer Advisory Council. So
with that background, without getting into the Kansas City
Chiefs, Chuck, I would like you to tell us briefly why your
organization has been unable to tap into the EDA funding? What
do you see as the problems of accessing EDA funding for urban
and to the extent that you have experience in the rural areas?
What impedes your ability to go to EDA?
Mr. Gatson. I think the biggest issue that we have with
accessing is staffing. The gentleman to my right talked about
that in Vermont. We have one person in the State of Missouri
that everybody goes through and it is very difficult to get his
ear, to get time with him. That is No. 1 for us. No. 2, it is
the difficulty in taking the EDA funds and getting them into
our projects at the appropriate time. We have not on a regular
basis attempted EDA because we have had other paths to go
through. I guess the district in Kansas City, MO, that deals
with EDA is administered by two separate agencies, Economic
Development Corporation and the city of Kansas City, MO, and
those two are not often talking to each other or dealing with
each other. So that is a problem for us, the local politics,
the local bureaucracies. That is why I spoke earlier about
special set asides for not-for-profit community development
corporations that can by-pass those kinds of local issues and
deal directly with the office in Washington, DC, based upon the
kind of projects that we do. I think the third thing is just a
fear from our organization of spending the kind of time and
effort it takes to put together that kind of application and
then not being successful. As I said, we have assets of about
$61 million but that does not mean that we have a lot of time
and a lot of staff. We have about 25 people and they are all
assigned to projects on a regular basis. So to take somebody
off of a process that we know that we can go through and be
successful and put them on a process that is a lot more
difficult, a lot less reasonable for success, that is the third
reason, Senator.
Senator Bond. The $22-to-$1 ratio you feel would be beyond
the ability of your organization and others with which you
deal?
Mr. Gatson. We thought we were pretty hot when we said we
were doing $7-to-$12-to-$1. In the communities I work in, if
you have $22 to do a project, you do not need $1 more. We have
$5 to do a project, we need $5 or $6 more to make it work.
Everything we do we thought was pretty highly leveraged,
everything from Community Development Block Grant funds to home
funds, to philanthropic program related investments, to bank
dollars, special equity funds. We use all of that. So for us to
go out and find another $10 or $12 to do a project, it will not
work for us. If there were those kinds of returns on investment
in the communities we worked in, the private sector would be
doing it already.
Senator Bond. Thank you, Mr. Gatson.
I wanted to followup with Dr. Singerman on a couple of
little ideas. Again, I join with Dr. Sampson in expressing
appreciation for the leadership you gave the Agency. We have a
local EDA project in my part of the State where a group of
farmers, a cooperative were trying to qualify for a private
loan from a bank and the bank could not lend the money without
assurance of EDA funding, but that cannot be announced until
the EDA completes its prevention of unfair competition study.
Is that really still necessary to do that? How important is
that?
Mr. Singerman. I do not think it is important at all and I
think we tried to get rid of it 6 years ago and were
unsuccessful. I believe the Administration's bill ends that
anachronistic provision, and I think the House agreed with
that. So that would be a step in the right direction.
Senator Bond. Finally, some people are saying that the
House bill gives EDA too much room to rewrite rules and
regulations. You have been in the other seat and now you are in
the International Economic Development Council, and I know you
have to watch your step because you have to apply to Dr.
Sampson, but is it going too far in giving him leeway to
rewrite rules and regulations?
Mr. Singerman. Well I do not know the provision in the
House legislation that does that. But I do know that between
the Department of Commerce's lawyers, the Department of
Commerce's budget office, OMB, congressional appropriating
committees, the congressional authorizing committees, and the
Office of Inspector General, there are lots of people who have
their eyes on EDA's programs and it is very hard to sneak
something through without the proper vetting. So I think you
would agree that the problem in the Federal Government is not
too much flexibility but really too little flexibility and too
many burdensome and onerous regulations and rules.
Senator Bond. Thank you, Dr. Singerman. Thank you, Mr.
Chairman.
Senator Inhofe. Thank you. I have no further questions but
if either of my colleagues do, feel free to ask.
Let me thank all five of our witnesses. Dr. Sampson is
still here and it is very unusual to stay for the second panel.
I appreciate that very much, Dr. Sampson. If anyone of you has
one or two things that you should have said and just realize
you did not, and you too, Dr. Sampson, get up here, we will
give you that chance to do so. Mr. Saudade?
Mr. Saudade. I would like to say that one of the problems I
had when we first got into planning our CEDS was that the
website was not very good at EDA. I want to commend EDA for
improving that website enormously. Today, it is such a great
resource and they have done a wonderful job with that. I really
appreciate that.
Senator Inhofe. Well, that is good. All right, anybody
else? Yes, Mr. Gatson?
Mr. Gatson. I would like to say I do recognize that there
are two Senators in the State of Missouri.
[Laughter.]
Senator Inhofe. That is what is unusual about Missouri.
[Laughter.]
Senator Inhofe. Dr. Sampson.
Mr. Sampson. Thank you, Mr. Chairman, for your flexibility.
I know we will have an opportunity to respond to questions, and
we look forward to that, written questions, and, again, I
certainly want to make myself available to members on both
sides for a personal sit-down with questions. But I do want to
clarify one thing in the public setting.
We have heard a lot about the $22-to-$1 as a goal. The
reality is that we have many, many grants that are far below
the $22-to-$1 ratio. We have some grants--as a matter of fact,
and I am sorry Senator Wyden is not here--we have one grant
that is in the process now for Port West in Oregon that is a
$980-to-$1 ratio, in a very poor, very rural community that is
going to have a significant impact on that whole region of the
State. Clearly, when the Seattle regional office has one grant
that has a $980-to-$1 ratio, that enables us to have a great
deal of flexibility on the small side of the scale to do small
projects that are not highly leveraged. That is why I talk
about this as it is an overall goal for a very broad portfolio
at the regional level but then at the national level.
What we look forward to is providing you with the full
range of grants so you can see that we do extremely small
leveraged grants as well as some that are very highly
leveraged. But the important principle is economic development
cannot be successful at any level unless there is significant
private sector money leveraged into that deal.
Thank you very much, Mr. Chairman.
Senator Inhofe. I appreciate that and I am sure that
Senator Wyden's staff will convey that, that we are talking
about averages.
Mr. Gorshing or Dr. Singerman, either of you have anything
further?
Mr. Singerman. Yes, Mr. Chairman. I would just like to
emphasize one point that I perhaps rushed through, and that is
the significance of this committee's action and your ability, I
know you are not the appropriators, but by sending a message
through the authorization levels that you set in the
legislation, to really set a benchmark for not only your
colleagues in Congress but members of the Administration to pay
attention to EDA and provide the level of funding that I think
you all would agree is necessary to support the kinds of
projects that you endorse.
Senator Inhofe. Well I appreciate that. I think our
sentiments have been conveyed to all of you as to our feelings
about the EDA and the work that you do. Again, we thank you
very much for all of your efforts.
With that, we are adjourned.
[Whereupon, at 11:20 a.m., the committee was adjourned, to
reconvene at the call of the chair.]
[Additional statements submitted for the record follow:]
Statement of Senator Craig Thomas, U.S. Senator from the
State of Wyoming
Mr. Chairman, I thank you for holding this hearing today. I believe
it is important that we as legislators continually review the functions
of the Federal Government so that the policies and programs remain
effective and efficient.
All too often it seems that all sorts of assistance programs
continue without review only to be duplicated by another Agency,
administration, bureau or nook in the Federal Government to address a
similar challenge as the previous program.
The EDA is an organization that many people look to when local
development, jobs and creating lasting improvements to the business
environment are needed. This is a unique organization with a mission
that cannot be understated, and we are fortunate to have Dr. Sampson as
its administrator.
As the American economy continues to grow and change, we must be
prepared to address the challenges that lie ahead. By allowing
communities to access funds for infrastructure and capacity, technical
assistance and other obstacles, we can see a one stop shop that will,
hopefully, allow an economically depressed area get assistance or get
training or get construction so folks can get back to work. In Wyoming,
we have seen a number of successes and it is important that as we hear
testimony and review the reauthorization, we capture the essence of
this program that will focus our resources to our rural and urban
communities to create jobs.
I am particularly pleased that we have Assistant Secretary of
Commerce Dr. Sampson here today to give us some insight on where his
program is and where he wants to take it. As I mentioned, this is
important to ensure our Federal dollars are used wisely. I know the
President has made the implementation of responsible and accountable
policy changes a priority and I am glad the EPW Committee can hear
testimony today.
__________
Statement of Senator Max Baucus, U.S. Senator from the State of Montana
Mr. Chairman, thank you for convening this hearing. As you know, I
am a big supporter of the Economic Development Administration. This
Agency has been a major contributor to the development of Montana's
economy over the years and has been a solid partner in state and local
efforts to move our state's economy forward. My support for EDA comes
from first-hand experience in working with EDA on virtually every major
economic development project and initiative over the past dozen years
or more.
I also have first-hand experience in EDA's reauthorization, as
former Chairman and ranking member of the Environment and Public Works
Committee. In 1998, I sponsored S. 2364 along with my original co-
sponsor, Senator Snowe. The bill eventually attracted co-sponsorship of
more than 60 Senators. That bill was unanimously reported out of this
committee and passed under unanimous consent in the Senate. Later that
year, the House of Representatives passed S. 2364 unanimously and it
was signed into law. This marked the first passage of an EDA
reauthorization bill since 1980, a period of 18 years.
That bill not only reauthorized EDA, but significantly improved
EDA's authority to advance this nation's efforts in improving the
economies of economically distressed communities. I am the first to
admit, however, that we cannot rest on our laurels. There is a need for
constant improvement. That improvement should be accomplished with a
recognition of the core mission of EDA and should recognize its
strengths while identifying ways to increase its effectiveness.
With this in mind, I feel that we should identify some of EDA's key
strengths. First and foremost is this Agency's efforts at the state and
local level. It is widely recognized that economic development is
inherently locally driven. That is, economic development is only
effective when state and local leaders engage the private sector to
realize economic development goals and objectives. EDA's strength is
that it is built on this premise.
A critical component in local economic development, for example, is
the Comprehensive Economic Development Strategy, or CEDS. These
strategies, a key requirement for investment, provides the basis for
consensus among local government and business leaders as they plan for
critical infrastructure improvements, public-private partnerships and
investment strategies that are needed to support economic growth and
job creation. In addition, EDA's assistance programs engage key
partners at the state and local level. These include state and local
government, economic development districts, local development
organizations, university centers, and tribal governments. Consensus is
created before a project is designed, much less implemented.
The effective word here is ``Partner''. EDA's programs do not
operate in a vacuum, directed by Washington bureaucrats. Instead,
assistance is directed by local and regional planning, with EDA staff
at the local level providing technical assistance where it is needed
most--on the ground, where the action is! EDA operates as an active
partner, working with state agencies and other Federal Agencies to make
a difference at the local level. This important partnership is greatly
enhanced by the actions of the Economic Development Representative. I
have witnessed first hand in Montana on many, many occasions the
excellent working relationship between the EDR and many Montana
entities. This is a core strength that we need to enhance. I will be
interested to hear Dr. Sampson's ideas regarding how we can augment
this important component of how EDA programs are delivered at the
state, regional and local level.
A major factor contributing to the success of EDA is its ability to
maintain its local partnerships over many years, ensuring continuity
and stability as economically distressed areas struggle to make lasting
economic improvements. A prime example is EDA's support for economic
development districts. Montana currently has four economic development
districts, providing economic and community development planning and
assistance to communities in 22 of Montana's 56 counties. The planning
grants provided by EDA have allowed these districts to develop and
maintain critical expertise to assist communities in addressing their
needs. However, funding for economic development districts literally
has not increased for more than 30 years. In fact, it has diminished
over that time. In addition, Montana has four economic development
districts that have been designated by EDA but do not receive any
planning funds. This means that the remaining 34 Montana counties do
not receive the substantial benefits of EDA's planning grant program.
In addition to economic development districts, some Indian Tribes
within Montana only receive $35,000 to support their economic
development planning efforts. Indian reservations are some of the most
economically distressed areas of this country. Quite frankly, I do not
know how we can expect advancements in the economic development of our
reservations with such limited resources. I would be particularly
interested in hearing Dr. Sampson's ideas for increasing funding for
economic development districts and Indian Tribes.
In my state, we also have an EDA-funded University Center. The
University Technical Assistance Program (UTAP) provides critical
technical assistance to small manufacturers using engineering students
from Montana State University. I cannot think of a more cost effective
way to provide valuable ``hands-on'' technical assistance to small
manufacturers than UTAP does. In fact, this program eventually lead to
the formation of the Montana Manufacturing Extension Center (MMEC).
These services are critically needed at this particular moment in time,
when manufacturers are moving jobs overseas. I would be interested to
know how EDA will strengthen its commitment to organizations such as
UTAP.
Another critical component in EDA's ``tool box'' of programs is the
successful Revolving Loan Fund program. In Montana, we have realized
significant private investment in our communities because this program
was available to economic development districts and local development
corporations. The program is responsible for literally thousands of
jobs retained or created in Montana communities. We need to build on
this program to ensure its effectiveness in combating low per capita
income, high unemployment, and high out-migration rates in our
distressed communities. Montana's EDA Districts, local development
organizations and other political entities have utilized the RLF
program in many innovative ways to leverage millions of dollars of
local, state and private sector funds to create significant employment
opportunities.
EDA's programs have proven to be effective in addressing local
economic development needs. These programs avoid duplication of other
Federal programs while providing assistance that complement other
Federal, state, and local efforts to create lasting improvements in
economically distressed areas.
In summary, I would like to stress that the success of EDA in
carrying out its mission is dependent on its partnership at the state
and local level. Assistance that is based on locally driven planning
through the Comprehensive Economic Development Strategy process,
coupled with adequate funding of our economic development districts,
tribal economic development programs, University Centers and the
Revolving Loan Fund program is the key to EDA's future success.
__________
Statement of David A. Sampson, Assistant Secretary of Commerce for
Economic Development, Economic Development Administration
Chairman Inhofe, Ranking Member Jeffords, Subcommittee Chairman
Bond, Subcommittee Ranking Member Reid and Members of the Committee,
thank you for this opportunity to appear before the Senate Environment
and Public Works committee regarding the reauthorization of the Public
Works and Economic Development Act of 1965 (PWEDA), as amended.
We are at a critical time in our economic history and the decisions
we make today will have profound impact. The challenges of today will
require policymakers to be forward-looking and innovative. Tomorrow's
Challenges will not be answered with yesterday's solutions.
Mr. Chairman, I am convinced that the only constant in economic
development today is change. Nowhere else is this more evident than the
scope of competition that American companies and communities face both
domestically and from worldwide markets. American companies and
communities must be able to operate in a worldwide marketplace and
American political leaders must be in synch with business and labor
leaders to adapt to this reality.
One significant step in this effort is to reauthorize the Economic
Development Administration. I urge the Senate to quickly pass this
legislation so the valuable program changes in this legislation can be
employed to help the economy grow.
On October 21, 2003, the House of Representatives passed H.R. 2535,
legislation to reauthorize the Economic Development Administration
(EDA). While H.R. 2535 is not the same as S. 1134, legislation the
Administration proposed to Congress on May 15 of last year and
introduced by Chairman Inhofe and Bond in on May 22, the House bill is
a bipartisan compromise that passed the House without dissent.
In 1965 EDA was created to help communities generate new jobs,
retain existing jobs, and stimulate industrial and commercial growth in
economically distressed areas of the United States primarily through
the construction of infrastructure. Assistance is available to both
rural and urban areas of the Nation experiencing high unemployment, low
per-capita income, or other severe economic distress.
EDA's work to help communities was greatly advanced by my
predecessor in the previous administration, Dr. Philip Singerman. His
work with your committee in 1998 to reauthorize EDA for the first time
in 16 years, set the stage for the improvements we seek in our proposed
legislation. I believe his testimony today will be valuable to your
efforts.
Today, EDA's mission is to lead the Federal economic development
agenda by promoting innovation and competitiveness, preparing American
regions for growth and success in the worldwide economy. In order for
EDA to achieve this mission and for the Federal Government to be
successful in its overall economic development efforts we need a New
Federal Economic Development Strategy for the 21st Century.
A NEW FEDERAL ECONOMIC DEVELOPMENT STRATEGY FOR THE 21ST CENTURY
As I travel across the Nation, it is clear to me that economic
development is a top agenda item for almost everyone. However, it is
also clear to me that America needs a smarter economic development
strategy for the 21st Century. We need to set clear expectations and
develop an overall strategy for these efforts by establishing a
coherent design--including some common management goals and common
performance measures among Federal economic development programs.
WHAT IS THE FEDERAL ROLE?
The bottom-line of economic development is prosperity--a high and
rising standard of living. Productivity and productivity growth are the
fundamental drivers of prosperity and innovation is the key driver of
productivity. President Bush has said, ``The role of government is to
create conditions in which jobs are created, in which people can find
work.'' The economic development focus of the Bush administration is
supporting innovation and competitiveness on a regional level across
America. Increased innovation and competitiveness empowers distressed
regions to attract private-sector investment thereby improving the
opportunities for American workers.
THINKING REGIONALLY
Economies are not hermetically sealed in artificial political
boundaries. The dominant reality of economic development today is that
all communities, cities, towns and counties alike, must think
regionally and pool their resources to build a strong economic platform
for growth. By pooling their resources regionally, communities can
attract the private sector investment necessary to spur job creation,
because it is the private sector that creates jobs and spurs economic
growth.
Let me give you an example: I was in Georgia meeting with officials
from four counties who were encouraging EDA to assist in the
development of a development project in one of the four counties. I
asked them, why three of the counties were asking us to invest in a
county outside of their own. They told me that they understood that
this project would be a driver of job growth for the entire region and
it would benefit all of their constituents. By pooling their resources
they could attract more private sector investment than if they each
went it alone.
Encouraging regional collaboration should be one of the key goals
for defining the Federal role in economic development--and it is at
EDA.
EDA is guided by the basic principle that distressed communities
must be empowered to develop and implement their own economic
development and revitalization strategies through close collaboration
with the private sector, local governments, and universities. Based on
these regionally developed priorities, EDA partners with state or local
governments, regional economic development districts, public and
private nonprofit organizations, and Indian tribes to help them attract
the critical private sector investment that is necessary to overcome
long-term economic distress as well as sudden and severe economic
dislocations due to natural disasters; the closure of military or other
installations; changing trade patterns; or the depletion of natural
resources.
PROMOTING AMERICA'S IMMENSE INNOVATIVE CAPACITY
The innovative capacity of the United States has always been one of
our greatest strengths. The innovation infrastructure of our country is
built on over 200 years of invention, discovery, development and
commercialization. It is an intricate system that exists no place else
on Earth.
Innovation will drive the growth of American industry by fostering
new ideas, technologies and processes that lead to better jobs and
higher wages--and as a result, a higher standard of living. America's
capacity to innovate will serve as its most critical element in
sustaining prosperity. New products and new production methods embedded
in the oldest of our mainline manufacturing businesses will raise our
productivity and ensure that our economy remains the most competitive
in the world. Only by focusing on innovation and competitiveness can we
ensure that the jobs created will be good jobs that provide a higher
standard of living for Americans.
America's economic infrastructure is dependent upon innovation and
one key place innovation occurs is on America's university campuses.
One of EDA's investment priorities is to advance technology-led
economic development by supporting the commercialization of university
research and development efforts by linking them with regional economic
development. We must foster technology transfer and entrepreneurial
ecosystems, in which private industry, universities and communities can
partner to drive economic expansion.
NATIONAL ECONOMIC DEVELOPMENT STRATEGY
EDA has a unique position in the national economic development
strategy. Since its creation nearly forty years ago, EDA has invested
over $12 billion dollars to help distressed communities create an
environment conducive to sustained job growth and economic opportunity.
This is a small fraction of the overall Federal investment in economic
development activities over the same period.
According to a General Accounting Office study of Federal economic
development programs conducted in 2000, there are at least 30 Federal
economic development programs, providing approximately seven billion
dollars to support economic development activities. Some more recent
analysis lists the budget for economic development at over $20 billion.
EDA's fiscal year 2004 budget of $318 million may seem
insignificant when compared to the nation's $11 trillion economy.
Indeed, it is critical to job creation and long-term economic growth
for the overall economy that the much larger macroeconomic policies in
President Bush's Six Point Economic Plan are passed by Congress as
well.
These critical six items are:
<bullet> Making Health Care Costs More Affordable.
<bullet> Reducing the Lawsuit Burden on Our Economy.
<bullet> Ensuring an Affordable, Reliable Energy Supply.
<bullet> Streamlining Regulations and Reporting Requirements.
<bullet> Opening New Markets for American Products; and
<bullet> Enabling Families and Businesses to Plan for the Future
with Confidence by Making Tax Cuts Permanent.
However, at the local and regional level, EDA has a proven ability
to provide catalysts for economic growth in areas the marketplace
bypasses or that are experiencing sudden and severe economic
dislocation. The legislation before the Senate to reauthorize EDA will
enhance our ability to address these important economic needs. EDA's
legislation was crafted with the following three principles:
<bullet> Being flexible to deal with change;
<bullet> Enhancing our coordination with other Federal programs;
and
<bullet> Rewarding Results.
INCREASED FLEXIBILITY
As I travel across the country talking with our economic
development partners, they repeatedly comment on the value to them of
our programs' flexibility. They like the existing flexibility of our
programs, but note that EDA can do better in some areas. We've listened
to their ideas about increasing that flexibility while maintaining,
even increasing, accountability for taxpayers' dollars.
To increase our flexibility, we have reorganized our work force to
improve and streamline our internal operations and through our
reauthorization we are seeking to transform EDA into a flexible,
forward-looking Federal resource that focuses on investing in economic
infrastructure that will promote development of regional engines of
economic growth.
Many of the Administration's proposed changes included in both S.
1134 and the version that passed the House are related to this
objective. For example, H.R. 2535 clarifies that certain non-profit
organizations and special units of government are eligible for EDA
assistance. As key players in the economic development arena, it is
important that we be able to work along side community development
corporations and municipal utility districts to promote strategies that
will result in economic growth. These types of entities were not
envisioned when EDA was created in 1965.
This Administration's proposal allows the savings, from
construction projects completed under budget, to be recaptured to fund
additional economic development projects. Under current law, these
funds are either returned to the Federal treasury or are used to
improve the project. EDA needs the flexibility to use these funds to
invest in additional projects in distressed communities. The House has
agreed to allow the EDA the opportunity to utilize these funds for
additional projects but modified the language to allow recipients of
EDA funds to keep under-run costs as an increase in the Federal share
of their grant.
Finally, both the Administration's bill and the House version
eliminate the provision in our law dealing with overcapacity (Section
208). This provision was relevant to our programs when EDA made large
loans to entire industry-sectors but has proven to be administratively
burdensome to both our grantees and our staff. We would also note that
communities providing mandatory matching funds will not invest in
projects creating over-capacity because they will not be viable over
the long term and the private-sector will not invest in a project
unless market demand exists. We will use investment policy guidelines
and our regulations to achieve the purposes of this section in a less
burdensome manner.
ENHANCING OUR COORDINATION WITH OTHER FEDERAL PROGRAMS
A highly trained and skilled work force is crucial to our economic
growth. The legislation we sent to Congress proposes several changes to
existing law to promote coordination among Federal economic and work
force development programs, such as those authorized under the
Workforce Investment Act. The House bill includes similar provisions.
The President has stated that a better-educated work force means
America is more productive resulting in more jobs and higher paychecks.
This Administration is committed to developing closer linkages between
work force development and economic development. I have been working
closely with my counterpart at the Department of Labor's Employment and
Training Administration to build these linkages. Our proposed statutory
changes would make it easier for these partnerships to be built at the
local level.
Additionally, the House added a provision to require EDA to
coordinate our efforts with other economic development programs, which
dovetails with our ongoing efforts to partner on a governmentwide basis
to coordinate Federal Economic Development Efforts.
REWARDING RESULTS
EDA has demonstrated through measurable outcomes the value of its
leading programs. We have adopted a Balanced Scorecard as a tool to
measure our performance and scored relatively well in the Office of
Management and Budget's Program Assessment Rating Tool (PART).
But these achievements are not enough. We have also focused the
agencies core values on results. Our values include:
R esponsibility
E ntrepreneurship
S ecurity
U rgency
L eadership
T eamwork
S uccess
Responsibility: We act with integrity and respect for others and
are accountable for our actions.
Entrepreneurship: We seize opportunities in the midst of change and
take market-based risks, challenging the status quo. We seek partners
with similar attributes.
Security: We enhance economic security. At work, we operate in a
safe, secure, and alert work environment.
Urgency: We act now--with alacrity.
Leadership: We develop leaders, communicate concisely, and exhibit
a high degree of professionalism. We make tough choices.
Teamwork: We are passionate about economic growth and build synergy
by collaborating. We expand relationships.
Success: We set high goals, stretch our abilities, and exceed
expectations. We focus on critical items first and commit to implement
them fully.
EDA evaluates its programs by measuring the results in such areas
as the number of jobs created and the amount of private-sector funds
leveraged. Correspondingly, EDA also requires its grantees to measure
the results of their projects.
This Administration expects high levels of results from EDA's
investments and commits to providing recipients an incentive to reach
these performance goals. When an EDA-funded project provides excellent
results taxpayers gain: prompt project implementation, better overall
stewardship of taxpayer resources, faster creation of higher-skill,
higher-wage job opportunities, and timely investment of private sector
funds--all of which help communities become more competitive and
economically vibrant.
REWARDING PERFORMANCE
EDA's proposed legislation contained a performance-based incentive
recognizing the importance we place on achieving results and the
critical role that our partners play in transforming distressed
communities into successful, economically stable communities.
Currently, applicants have an incentive to overstate the number of jobs
they anticipate creating because job creation is a large part of the
evaluation criteria. The Administration hopes to temper this incentive
by offering a 10 percent bonus award for projects that exceed their job
performance targets. This funding for the 10 percent bonus would come
from the elimination of the 10 percent bonus for projects that flow out
of the economic development districts, as described below.
The House was very supportive of the concept, but altered the
delivery mechanism of this incentive. The House creates a performance
based incentive program that would reward high performance with a
straight bonus, rather than EDA's proposed credit, of up to 10 percent
of the project cost that can be used on other eligible activities.
For example, if the city of Stillwater, Oklahoma received a $1
million grant from EDA that promised to create 200 jobs and attract $35
million in private sector investment and the project created 450 jobs
and attracted $60 million in private sector investment, it would be
eligible for an EDA performance award of $100,000. This $100,000 could
be used by the city of Stillwater for improving the project, for
another EDA project, or it could be used as non Federal matching funds
for other Federal grants the city may be seeking.
This House provision retains the pro-results intent of the
Administration while rewarding local recipients with additional
flexibility to make this reward a useful goal. We believe that by
recognizing high performance recipients with a significant and tangible
incentive-based reward, this provision will raise the performance bar
across the board for all EDA recipients. It will also help EDA evaluate
projects at the front end of the process as it will encourage
applicants to focus on achievable goals for the projects in submitting
their applications.
The House also made an additional performance incentive change. The
Administration's proposal calls for the elimination of the current 10
percent bonus for projects that flow out of economic development
districts under section 403 of the statute (42 U.S.C. 3173) because
participation in the economic development districts is high. The
Administration believes the current 10 percent bonus could be better
spent to incentivize performance, as outlined above. The House bill
similarly deletes the current 10 percent bonus for economic development
district projects, but also has added a 5 percent planning performance
bonus similar to the 10 percent performance award. This 5 percent
planning bonus would go to recipients who utilized an economic
development district to process and support an economic development
project. Projects in a region not covered by an EDA approved Economic
Development District would not be eligible for this award.
REVOLVING LOAN FUNDS
One component of results is being a good steward of the taxpayer's
money. At EDA, no where is this more important than our revolving loan
fund (RLF) program.
Twenty-seven years ago EDA created the first economic development
RLFs. Today, with a portfolio of over 600 RLFs, worth approximately $1
billion, EDA believes that it is both necessary and appropriate to
implement much needed management reforms to ensure the continued
effectiveness and accountability of these funds. In its reauthorization
proposal, EDA seeks new authority to correct technical issues to ensure
the efficient operation and financial integrity of our Revolving Loan
Fund Program.
FINANCIAL INTEGRITY AND ACCOUNTABILITY OF THE REVOLVING LOAN FUND
PROGRAM
Over the past 3\1/2\ years, the Department Of Commerce's Office of
Inspector General has conducted 46 audits of EDA Revolving Loan Funds.
The seriousness of financial integrity problems in the revolving loan
fund program is demonstrated by the several file cabinets full of
documents we have had to review to resolve significant problems. All
but a handful of these audits revealed serious instances of non-
compliance or failure to safeguard RLF assets, including:
(1) Unused RLF assets due to startup delays or insufficient demand
for loans;
(2) Ineligible loans or borrowers, and failure to properly document
loan decisions; and,
(3) Poor accounting and financial management practices, including
failure to safeguard and protect RLF assets.
The Inspector General reported significant problems for Revolving
Loan Funds operated in every region of the Nation, by many different
local, state and regional development organizations. These 46 audits
cover a significant portion of EDA's overall portfolio and I believe
are indicative of problems with the program. We must act now to avoid
much larger problems in the future to make sure this economic
development tool remains a viable option.
The Administration's proposed legislation provided EDA with the
authority to write specific regulations addressing basic financial
accountability standards that every EDA RLF must meet. These uniform
standards will then be incorporated into the Single Audit Act
compliance requirements. This will allow certified public accountants
conducting RLF audits to verify the financial integrity of EDA RLFs on
a regular basis.
These changes in our RLF program will produce positive effects on
our partners around the country. With a more robust audit, EDA need
only require an annual report from our RLF's instead of the semiannual
reports currently required.
Additionally, over sixty EDA RLF operators manage from two to four
EDA RLFs, capitalized at different times from different EDA
appropriations, such as a Long Term Economic Deterioration (LTED) RLF,
a defense adjustment RLF, or created following a natural disaster. The
proposed technical corrections will enable EDA to merge multiple RLFs
into a single, efficient fund per operator, thereby greatly simplifying
the administrative and reporting burden for both the grantees and EDA.
In many instances RLFs will decrease from four reports to one more
comprehensive report, annually, and numerous RLF operators will
decrease from eight reports to one report, annually. These changes will
reduce bureaucracy, improve accountability, and save valuable staff
time and resources for both our RLF operators and EDA.
The House has accepted these changes with one clarification. The
House made clear that the consolidation is an option of the RLF
operator, not a mandate from Washington. That is a helpful distinction
that the Administration accepts.
TRANSFER OF RLFS TO THIRD PARTIES FOR LIQUIDATION
The legislation also seeks new authority to transfer RLF portfolio
assets to third parties for liquidation. Due to issues of non-
compliance or simply for the convenience of the parties, EDA, in some
cases, needs to terminate an RLF. To date, the uncertainty of how to
deal with, and pay for, the liquidation of an outstanding portfolio of
loans has seriously impaired EDA's ability to dispose of these assets
in a timely manner. By allowing EDA to arrange the transfer of the RLF
portfolio to a third party, the new law will enable EDA to arrange for
the orderly or timely disposition of an RLF while paying for the
necessary costs of liquidation activities from the assets of the RLF
being terminated.
The House accepted this provision in H.R. 2535.
RELEASE OF THE FEDERAL INTEREST IN EDA RLFS
Finally, at the request of the RLF community, the Administration
seeks new authority to closeout existing RLFs by allowing the repayment
of the initial grant used to capitalize an RLF after a period of 20
years, similar to the release of EDA's interest in public works grants
after 20 years. Although EDA does not directly fund RLFs, it does
provide grants to local governments and non-profits that in turn set up
revolving loan funds. Unfortunately, the House did not accept this
change to our RLF program in H.R. 2535.
It is important to note that this provision is a very modest change
to current law. Current law provides that an RLF grant recipient can
cut its strings with the Federal Government by compensating the Federal
Government for the Federal share of the value of the RLF property. As
an incentive to encourage a gradual reduction in the number of RLFs
outstanding, our proposed provision would allow a RLF grant recipient
to cut their strings with the Federal Government by repaying the amount
of the initial grant only.
This provision would apply to RLFs that have demonstrated and
sustained financial and program performance. I believe that after 20
years any high performing RLF will have provided considerably more new
jobs and increased leverage of private-sector investment than
originally anticipated.
We anticipate that the proposed buy-out option will be particularly
attractive for the best performing RLFs and will become an important
performance incentive for all RLFs. The ability of an RLF to closeout
their grant from EDA after 20 years of successful management will
provide EDA a powerful new management tool and RLFs with a strong
incentive to increase their efficiency.
Further, this new authority will help EDA to correct the historic
and growing imbalance of finite EDA resources available to monitor and
administer an ever-increasing number of RLFs. Without congressional
action, RLFs will become less attractive to economic development
professionals as they are perpetual, federally regulated, grants
despite possible changed circumstances. The gradual reduction of EDA's
RLF portfolio will enable EDA to effectively utilize its staff for
higher quality administration of the remaining grant portfolio. It will
allow us to recognize our economic development successes from the last
20 years and move on to future challenges.
COMMENTS ON ADDITIONAL HOUSE CHANGES
H.R. 2535 made several other changes to the Administration's
proposal.
As part of the last minute negotiations on the bill, a section of
the House bill raised the Federal share of all planning grants to be a
minimum of 65 percent. Currently this share is 50 percent-100 percent
for Native American planning grants. I would like to point out to the
Senate that this change in Federal minimum percentage will have no real
dollar impact for economic development districts. Since we have more
districts than funding, everyone will receive the same amount of money.
What this does do, however, is lower the local cost share and that may
negatively impact planning activities as EDA is ``buying'' less of a
product.
Similarly, H.R. 2535 did not include the Administration's flexible
language relating to program funding. The Administration sought
language to set the budget for the current year at the President's
request with such sums as necessary for the next 4 years. The House has
instead chosen to authorize program funding at $2.25 billion over 5
years.
H.R. 2535 also places a rider that expands the boundaries of the
Appalachian Regional Commission. The Administration opposed similar
language in H.R. 3550, the Transportation Legacy Act. Moreover, this
provision is not related to EDA reauthorization and should be removed.
I encourage the Senate to pass a clean bill.
BROWNFIELDS AND BRIGHTFIELDS
The House also added sections 218 and 219 related to Brownfields
and Brightfields. These provisions purport to allow EDA to engage in
redevelopment of projects utilizing brightfield technology or in
brownfield areas.
I appreciate the interest that the Committee has shown in EDA's
brownfields activities, which have represented a significant part of
EDA's investment activities over the past 5 years. From fiscal year
1999 through fiscal year 2003, EDA has made 269 investments in
brownfields totaling $266,579,653, or 15 percent of EDA's total program
appropriations during that time period. That works out to an average of
54 brownfields investments annually, with an average brownfields
expenditure of $53,315,931 per fiscal year.
We look forward to continuing our pro-active work in brownfields
investments, especially given the anticipated BRAC round scheduled for
fiscal year 2005. Our major goal with the legislation is to be able to
continue this work with maximum flexibility in accord with EDA's
funding priorities and investment policy guidelines. The provisions
that tie EDA to the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA) in the House bill and in legislation that
passed this committee in the 107th Congress cause us particular
concern.
These provisions attempt to graft a set of definitions, obligations
and limitations from CERCLA onto EDA's brownfields activities that are
not consistent with EDA's brownfields work. The CERCLA provisions, as
written, would radically alter and ultimately wither EDA's current
brownfields work.
CERCLA brownfields provisions are directed toward a clean-up
program, because that is the focus of CERCLA--to authorize the Federal
Government to fund and perform, establishing liability for, and
reimbursing the Superfund for--environmental clean-up.
On the other hand, EDA's investments in brownfields rarely involve
even the most residual clean-up activity. Our work is directed to a
completely different end--development of an existing project site to
create jobs and get it back on the tax rolls.
The consequences of EDA being bound by the CERCLA provisions would
be extreme. As the most obvious example, funding under this section
could not be applied to former military bases as CERCLA does not
consider military bases to be ``brownfields.'' EDA does. What's more,
EDA recipients would be unable to claim reimbursement for the cost of
any Federal compliance, as they are currently allowed to do. This is of
particular concern as it relates to our work with Indian Tribes.
Currently, federally recognized tribes are eligible for 100 percent
grants from EDA. This provision would weaken our ability to fund
brownfields development on Indian lands. But the real overall effect
would be to limit and steer EDA's existing brownfields activities
toward those involving clean-up of polluted sites, and we believe that
would ultimately end EDA's program. Of course, EDA is not seeking to in
any way relieve a responsible party from liability under CERCLA nor
provide funds to a party to undertake clean-ups required under CERCLA,
since to do so would undercut the ``Polluter Pays'' principle on which
CERCLA is founded.
I am confident that a mutually agreeable provision can be drafted
that strengthens our work to redevelop brownfields sites. I stand ready
to work with the Committee to craft a solution to this issue, with
consultations, technical drafting assistance and other assistance you
require.
I also urge the Committee to retain section 701 of H.R. 2535 which
provides a general authorization of appropriations for EDA's programs
without imposing special limits for brownfields redevelopment or other
programs which could limit EDA's flexibility to respond to a variety of
economic situations.
Moreover, the section on Brightfields contains a demonstration
program for economic redevelopment using solar sources. EDA is not
opposed to pursing the right Brightfields project provided it is
consistent with our goals to create as many jobs and attract as much
private sector support as possible. Again, the goals of the House's
Brightfields language can be furthered using existing EDA program
authority.
SUMMARY
The Administration's legislative proposals and H.R. 2535 contain
valuable program enhancements, critical to EDA's continued success.
They will safeguard the financial integrity of EDA's programs while
ensuring a more flexible and forward looking organization to meet the
challenges of the 21st Century.
The testimony from my colleagues that you will hear from today
demonstrates exciting new growth opportunities in the area of economic
development. To take advantage of these opportunities the
Administration's legislation focuses on:
(1) Increasing flexibility to allow us to take advantage of these
exciting opportunities;
(2) Enhancing coordination to work in a comprehensive fashion with
other agencies to achieve results; and, most importantly,
(3) Rewarding the performance of our most successful partners.
I urge that the Senate act quickly to pass legislation to give EDA
and our partners across the Nation serving regions in economic distress
the economic development tools necessary achieve the President's goal
to leave ``no demographic or geographic area behind in the pursuit of
more fully participating in the American Dream.''
Thank you for the opportunity to testify before you today and I
look forward to answering your questions about this legislation.
______
Responses by David Sampson to Additional Questions from Senator
James M. Jeffords
Question 1. EDA would like to achieve leveraging ratios of 22:1 of
other funds to EDA dollars. As Mr. Saudade testified, this level of
leveraging, while laudable, is very difficult for a rural state like
Vermont to achieve. How can you guarantee that rural states will still
receive a fair share of EDA dollars? Please provide a completing
listing of EDA's grants to Vermont over the last six years, the
leveraging ratio on each project, and the annual leveraging average
broken down by state covered by the Philadelphia Regional Office during
each of the last six years i.e. FY 1998-FY 2003--if data are available
for FY 2004, please provide this as well.
Response. Since 2000, EDA has shown impressive results in
attracting private capital investment in distressed communities,
especially rural communities. It increased the average ratio of private
capital investment per every EDA dollar invested across its
infrastructure projects portfolio by 405 percent from 8.7:1 to 43.9:1.
In rural areas in particular, EDA increased that ratio 115 percent from
10.5:1 to 22.6:1. And the percent of EDA's investments in rural areas
have not changed to any statistically-significant degree (69 percent in
2000 versus 66 percent as of May 6, 2004). Therefore, while the percent
of EDA's funds invested in rural areas remain substantially the same,
the amount of private capital investment in rural areas has
dramatically increased. This dramatic increase is a leading indicator
of future increased job creation. Reducing private capital investment
is a dangerous proposition that will lead to reduced job growth.
See attachments 1A, 1B and 1C. Please note that on chart 1B private
sector investment is not calculated for grants other than
infrastructure projects. As a result there are missing data points and
zeros in the private sector investment columns.
[The referenced documents follow on pages 51-54.]
Question 2. EDA has a number of investment criteria they consider
when evaluating grants that appear to be subjective. How does EDA
evaluate these criteria?
Response. All proposals for EDA investment assistance are reviewed
by EDA's regional office. Each regional office utilizes an Investment
Review Committee (IRC) comprised of career EDA staff professionals
experienced in EDA's programs and economic development work. Most of
these career staff members have been with the agency for many years,
even decades. The IRC process includes the review of each proposal in
light of EDA's investment criteria. Proposals are evaluated in
comparison to other proposals under consideration in that specific
regional office and based on previous proposal evaluated by the IRC.
EDA's five investment policy guidelines are: (1) The investment
must be market-based and results oriented; (2) The investment must have
strong organizational leadership; (3) The investment must advance
productivity, innovation and entrepreneurship; (4) The Investment must
look beyond the immediate economic horizon, anticipate economic changes
and diversify the local and regional economy; (5) The investment must
demonstrate a high degree of commitment from other governmental
partners and the private sector.
Question 3. A number of EDA investment criteria appear to drive
federal assistance to large companies versus small enterprises that
exist in distressed communities. For example, the investments must be
market-based, a high level matching funds is required, and the
investment must maximize return on taxpayer investment. While it is the
private sector that must create the jobs, the public sector can help
ensure that communities have a chance to level the economic playing and
support local small and medium enterprises.
It seems that these investment criteria might lead EDA to assist
larger companies rather than helping small and medium-sized companies
generate economic opportunities in communities. EDA awarded a $1
million grant to support BMW's manufacturing plant in Greer, South
Carolina. Please explain the rationale for the grant to this BMW plant?
Please provide a yearly listing of the private and public companies
with over 500 employees in the United States that received EDA
assistance between FY 2001 and FY 2004, and the amount of such
assistance.
Response. EDA does not provide grants or direct loans to any for-
profit entities. In fact, EDA has regulations (13 CFR 314.3(c)) to
guard against the indirect ``pass through'' of the benefits of EDA
grants from EDA eligible entities (e.g. government entities, non-profit
organizations) to a for-profit entity. However, EDA investments may--
and in fact are geared toward--the benefit of the local economy, which
naturally includes private, for-profit entities.
The $1 million grant that you referenced was made to the Greer
Commission of Public Works in 1994 and involved the construction of
water lines, relocation of an elevated water tank, and an emergency
backup power system that would help serve the new BMW facility located
in Greer. This grant was made to support the long-term development of
the regional economy and the automotive cluster in South Carolina. The
entire project resulted in over 4,500 direct-hire jobs at BMW and over
7,500 jobs with local area suppliers.
There is no data to match your request.
Question 4. In February, Secretary Evans announced that the
Manufacturing Extension Partnership program (MEP) would be eligible to
compete for up to $45.4 million in economic adjustment assistance
provided by the EDA. How much funding has EDA made available to the MEP
Centers and how is EDA reaching out to these Centers to make this
funding available?
Response. EDA strives to be forward looking and to approaching its
responsibilities in a pro-active manner. As a result, EDA's regional
offices have a good idea of the investments they will approve several
months in advance. This means that once fiscal year funds become
available to EDA, much of the `pipeline' for EDA investments is already
filled.
At Secretary Evans' direction, EDA held in abeyance all non-
committed EDA Economic Adjustment funds, totaling about $5 million.
These funds will be focused on communities experiencing job losses in
the manufacturing sector and initiatives geared to advancing America's
competitiveness in manufacturing, including MEP Centers.
A joint EDA and Technology Administration (the parent entity for
the Manufacturing Extension Partnership) committee has been formed and
will be responsible for identifying those MEP Centers in a position to
successfully compete for EDA funds. Once identified, a representative
from EDA accompanied by a representative from the MEP Program will work
with the MEP Center to complete and process their application for EDA
funds.
Question 5. Please comment on any future plans to reorganize or
reassign the regional economic development representatives?
Response. EDA has had flat funding for S&E since FY 2002, and
anticipates this level of funding for FY 2005. Through the Headquarters
restructuring effort, EDA was able to absorb inflationary increases to
payroll and other cost categories such as rent and utilities without a
reduction in force. Because EDA is small and operates on an extremely
frugal budget, the tangible impact of flat funding was an inability to
transfer the savings from the headquarters reorganization to increase
resources in the regions. In light of anticipated future flat funding,
EDA is now analyzing its regional operations to look for opportunities
for streamlining, process improvements and increased efficiency. EDA
has not yet completed its analysis nor developed final recommendations
at this time but will look forward to the opportunity to work with your
staff to ensure EDA can continue to provide the highest level of
service within available resources.
Question 6. Please provide an annual breakdown of RLF
capitalizations and recapitalizations grants from FY 1998 through FY
2004. Please include grant amounts, grantee name, and type of
geographic location served i.e. urban or rural.
Response. [The referenced documents follow on pages 55-58.]
Question 7. Please provide a list of EDA grants over $1 million for
FY 2002-FY 2004 that fit under the President's faith-based initiative.
Response. It is important to note that all EDA investments in
faith-based initiatives are subject to the same review process and
investment criteria as all other EDA proposals.
Response. [The referenced document follows on page 59.]
Question 8. Should planning funds be set aside to help create new
economic development districts?
Response. Economic Development Districts (EDD) were a concept
included in EDA's original legislation in the mid-1960s. Since that
time, EDA and local development entities have been very successful in
creating EDDs that cover most of the Nation, and a vast majority of
populated areas.
Planning is a critical element of economic development and EDA will
continue to advocate sound, market-based and collaborative planning
efforts by economic regions. However, with limited funds, EDA is unable
to dedicate additional funds to support local planning efforts without
having a substantial, negative impact on our programs that directly
support the creation of higher-skill, higher-wage jobs.
EDA's appropriation for planning has remained at $24,000,000 since
FY1997.
Question 9. On April 22, 2004, Tom Friedman wrote in the New York
Times that the United States is currently engaged in a war for
innovation. Clearly our manufacturing sector is under siege. EDA's
entire budget of about $315 million is tiny compared with the overall
Federal budget and this country's GDP. Are we in danger of losing our
competitive edge, because we are not devoting enough resources to
economic development?
Response. EDA's modest budget makes it even more critically
important that the agency leverage federal dollars with private sector
investment. EDA often provides the critical final component allowing
high-impact development projects to proceed. While EDA's budget may
only be about $300 million, we anticipate EDA will be able to leverage
over $10 billion in private sector investment, a key indicator of
future job growth.
In addition, EDA is not the only federal agency with economic
development responsibilities. A recent analysis by the Office of
Management and Budget cites over $20 billion annually in federal
programs across nine federal departments and agencies with economic
development responsibilities. In addition, the federal government
spends about $15 billion a year in workforce development programs.
These federal resources highlight the need to increase federal
coordination of job producing efforts.
It is also important to keep in mind that in fiscal year 2004, the
federal government will spend a record $126 billon on research and
development (a 42 percent increase since 2000) and President Bush has
proposed increasing this amount further to $132 billion. The American
private sector will spend an additional $193 billion on research and
development, a trend that can be enhanced by making permanent the R&D
tax credit.
Question 10. As part of an economic redevelopment project,
recipients of EDA grants on occasion engage in environmental
remediation and other clean up related activities at their sites. Does
EDA currently fund projects that primarily involve environmental
remediation or is such remediation typically incidental to the economic
redevelopment project?
Response. Environmental remediation activities undertaken as part
of an EDA funded economic redevelopment project are always incidental
to the larger redevelopment activities. As a general rule, as an
economic development entity, EDA believes that cleanup activities are
most appropriately handled by state and federal environmental
regulatory agencies with the background and technical expertise to
address complex remediation issues. EDA is exclusively focused on the
end use of the parcel, and has a policy of not engaging in land
banking, or cleanup for cleanup's sake. Therefore, EDA would not fund a
project that consists only of environmental remediation simply to
prepare a site for an unknown future use. EDA's Hazardous Waste Cleanup
Policy states that ``EDA will . . . participate in cleanups as a
relatively minor part of an overall economic development-related
project that directly results in beneficial economic activity in
distressed communities.''
Furthermore, cleanup activities exclusive of a market-based
redevelopment plan would not be competitive under EDA's established
investment policy guidelines. EDA is not interested in funding projects
that lack solid market fundamentals and that have limited likelihood of
supporting the future growth of the regional economy. This would
include speculative projects with no clear plan for future development
or very long development lead times. As a general rule, EDA is also not
interested in funding projects that have a minimal impact on securing
jobs and leveraging private investment or have undefined purposes.
Finally, some institutional history may be instructive. In 1995,
EDA became the U.S. Environmental Protection Agency's first federal
partner in EPA's then-newly-minted national Brownfields Redevelopment
Initiative. At that time, and during the ensuing years, EDA's mission
has been recognized not as that of a cleanup authority, but as an
agency that can facilitate brownfields redevelopment. The brownfields
revitalization process has been characterized by both entities as a
continuum, with EPA focused on the front end with assessment and
cleanup, and EDA focused on the back end with the economic
redevelopment of the sites.
Question 11. When EDA grant recipients engage in environmental
remediation activities as part of an economic redevelopment project,
what environmental cleanup standards apply, and how does EDA oversee
the projects to ensure that the work performed is consistent with
federal environmental standards?
Response. When EDA investment recipients engage in environmental
remediation activities as part of an economic redevelopment project,
all applicable federal and state cross-cutting statutory requirements
apply. This could include the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA), the Resource Conservation and
Recovery Act (RCRA), the National Environmental Policy Act (NEPA), the
Clean Water Act, the Safe Drinking Water Act, and the Clean Air Act,
among others. EDA is typically involved in a brownfield redevelopment
project after the site or facility has been certified ``clean'' to
applicable standards by federal and state environmental authorities. In
instances where incidental cleanup is involved, that cleanup is always
conducted pursuant to applicable state and federal requirements and EDA
works closely with applicable entities (i.e., federal and state
environmental regulatory authorities) to ensure that all applicable
cleanup standards have been satisfied.
EDA has environmental compliance specialists in each of the
bureau's six regional offices. These individuals, in coordination with
EDA project engineers and attorneys, work closely with representatives
from other federal and state environmental regulatory authorities to
confirm that when remediation work is performed, all applicable
environmental standards have been satisfied. These same individuals are
involved in ensuring environmental compliance in instances of EDA non-
brownfields related infrastructure development work as well.
Question 12. Federal facilities are required under CERCLA
Sec. 120(h) to ensure that all remedial action necessary to protect
human health and the environment are taken prior to a transfer of the
property to a non-federal owner. To the extent that remediation
activities are needed as part of an overall economic redevelopment plan
of a Department of Defense site, for example, DOD would be required to
pay for the cleanup. Is it accurate that EDA would not use its economic
redevelopment funds to perform remediation activities at federal
facilities?
Response. Instances of EDA remediation activities at former federal
facilities are similar to those carried out at typical EDA brownfield
project investments. As noted previously, in the context of the
bureau's brownfields redevelopment work, in isolated instances EDA has
been involved in cleanups where they are subordinate or incidental to a
much larger economic development project. In all of these cases cleanup
eligibility has hinged on the fact that the costs have been reasonable,
related to a larger redevelopment project, and have not consumed a
significant portion of the investment award. Moreover, remedial work at
former federal facilities being redeveloped can go beyond the
``hazardous substance'' warranty under Section 120(h) of CERCLA. For
example, EDA has addressed asbestos remediation as part of the
demolition and removal of structures on former federal facilities, and
underground storage tank removal as part of the construction of new
infrastructure (e.g., roads, utilities, etc.) to support site
redevelopment. Nevertheless, in all instances, EDA-funded remediation
has represented a very small portion of the larger redevelopment
effort. Like EDA's other brownfields redevelopment work, in most cases
the hazardous substances at the site have already been fully cleaned by
the federal landowner, e.g., the Department of Defense, prior to
transfer or lease of the site to the project sponsor. EDA carefully
vets with all involved parties the documentation certifying the
environmental condition of the site to be transferred.
However, as you know, in rare instances additional remediation
needs arise following transfer of the site during the redevelopment
phase. This may occur because of unknown circumstances, unforeseen
future uses or a change in project scope. If these additional
remediation needs are substantial, EDA suspends funding of the project
and reverts the project to the appropriate federal authorities,
including the prior landowner. EDA does not have the technical,
financial or program resources to undertake such work. If, however,
those needs are purely incidental to the project (as with the examples
cited above), EDA will fund the incidental remediation if doing so will
safely and legally ensure the efficient and expeditious reuse,
redevelopment or expansion of the site. Reversion of the project to the
prior landowner in these circumstances would almost certainly
substantially delay the project, which could jeopardize its overall
progress and success. EDA's policy is to undertake such remediation
only in service of its economic development objectives. In doing so,
EDA ensures that this work is conducted pursuant to applicable state
and federal requirements, and it works closely with applicable
authorities to ensure that all applicable cleanup standards have been
satisfied.
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Responses by David Sampson to Additional Questions from Senator Thomas
Question 1. What are your thoughts on including Census tract data
to calculate the eligibility for projects?
Response. EDA currently allows applicants to submit requests for
EDA investment based on Census tract data. EDA allows Census tract data
to identify pockets of poverty for eligibility within jurisdictions
that otherwise do not meet the distress thresholds for eligibility. Of
course, there must be a pocket identified with one or more census
tracts, and the proposed EDA investment must be directly and
specifically linked to benefiting the residents of the pocket of
poverty. Often this is the most accurate data available to local
communities.
The Bureau of Land Management has recently funded a program to
provide economic profiles to western communities free of charge by
using Census and other data. This data can be found at www.sonoran.org
under the link Economic Profile System link.
Question 2. Do you know how many districts, nationwide, within the
EDA are in a similar situation? It seems unusual that we would create
this program and go through the process of creating these districts and
treat them differently.
Response. Of a total of 358 recognized economic development
districts, 320 were funded with partnership planning funds in FY03,
leaving 38 EDD's without an annual funding commitment from EDA. 36 of
38 districts are not receiving funding from EDA in any form for their
planning activities. There are also three pending designations that are
not able to be funded under this year's budget. However, many districts
receive assistance out of other Economic Development Assistance Program
funding such as short-term planning grants or technical assistance
funding, in order to develop a Comprehensive Economic Development
Strategy application to make a region eligible for additional EDA
investment.
For example, in FY03, EDA received $23,844,000 for it planning
program. EDA provided for 392 investments with this funding in this
manner:
------------------------------------------------------------------------
------------------------------------------------------------------------
Partnership planning--districts........... $17,328,345 (283
investments)
Partnership planning--Indian.............. $2,728,778 (56 investments)
Partnership planning--eligible areas...... $230,000 (4 investments)
Short term planning--substate............. $2,026,548 (30 investments--
9 of these were to EDDs for
total of $579,343)
Short term planning--urban................ $883,658 (12 investments--1
of these was to an EDD for
$35,000)
Short term planning--state................ $749,445 (7 investments)
------------------------------------------------------------------------
Fourteen EDD grants for Kentucky and thirty-four EDD grants for the
Austin region are not accounted for within the above funding breakdown.
The 14 EDDs in Kentucky receive their funding through a statewide grant
that is then parceled out to the 14 districts and the Austin regional
office funds districts in 3 year intervals.
Some counties within economic development districts (EDDs) move in
and out of the distress designation as economic conditions change.
(This is the case with Wyoming, where economic shifts have recently
moved several EDDs out of eligibility. Wyoming currently has only three
counties that are distressed based upon Census data--Goshen, Big Horn
and Lincoln. In addition, Laramie, for example, meets distress criteria
as a city.)
Question 3. What is the cost for getting all of the districts
funded?
Response. A funded district averages $56,000 in annual grant funds
from EDA. EDA would need an additional $2,128,000 in partnership
planning funds in order to fund all unfunded districts (38) at this
$56,000 level.
Question 4. Can you tell me about how the EDA recently moved to
reduce the rate of $10,000 per job created to $5,000 per job with a $22
to $1 capital requirement?
Response. The $5,000 per job measurement is an overall average goal
set for all the EDA regions and only applies to infrastructure and
revolving loan funds grants. It is not a requirement that all specific
EDA investments must meet. The $5,000 per job measurement was recently
added to the internal EDA balanced scorecard that consists of 35
separate measurements to score the performance of the regional offices.
It is a cumulative measure that accounts for an entire fiscal year of
activity. As with the 22:1 ratio, EDA regularly discuss the $5,000 per
job measurement as a factor for evaluating investment proposals. Since
demand for EDA support typically exceeds the funding allocated to a
region, these job and investment factors can be important determinants
assessing the relative merits of proposals under consideration. These
factors are not the sole determinants but are part of five EDA
investment priorities against which all proposals are evaluated.
______
Responses by David Sampson to Additional Questions from Senator Baucus
Question 1. As you know, I have been concerned for some time about
the effect of the ongoing reorganization at EDA on the management
structure of the Trade Adjustment Assistance for Firms program. This
program works well with a very small central staff in Washington,
supplemented by the activities of the regional Trade Adjustment
Assistance Centers. To my mind, the management structure of the TAA for
Firms program is not broken and it doesn't need to be fixed.
In the past, you have told me that the overall reorganization is
motivated by a desire to: (1) reduce layers of government; and (2)
bring EDA programs closer to their intended beneficiaries. Unlike other
EDA programs operated out of the Washington office, TAA for Firms
already has close ties to its intended beneficiaries through the TAACs.
Making petitioners work through both the TAAC and the EDA Regional
office, with continued policy control from Washington, seems to add a
layer of government. And it certainly appears to require a much larger
EDA staff in seven different locations instead of one.
Please explain how moving the TAA for Firms program to EDA Regional
offices improves program management, reduces layers of government, and
brings resources closer to their beneficiaries.
Please also provide in writing EDA's plans for staffing TAA for
Firms in the regional offices and details of the timing and content for
training regional staff in the operation of this program. Will the
current staff administering TAA for Firms be retained, and if so in
what capacities and locations? Will regional staff be fully trained
before Washington staff are released or reassigned?
Response. While the Trade Adjustment Assistance (TAA) for Firms
program can work better--and as stewards of taxpayer resources we
should continually be looking to improve the efficiency and
effectiveness of public programs. For example, during my tenure, we
have identified numerous deficiencies in the management of this
program, for example: TAA Centers have sought approval for firms that
do not meet certification guidelines or have other irregularities that
has led EDA to embark on a complete review and update of policies,
procedures and regulations to ensure compliance with all applicable
statues. We anticipate this process to be completed later this year.
One of the challenges the program has faced is the lack of
resources to provide sufficient oversight of the program. Currently,
EDA has three staff dedicated to the TAA for Firms programs, the senior
most of these three also handles issues related to EDA's University
Center and Economic Development District programs. This does not
provide the capacity to enable sufficient oversight for the program.
The location of these personnel in Washington, DC, is also a hindrance
to adequate oversight.
The President's Management Agenda calls for moving program delivery
closer to the people that the government programs are designed to
serve. EDA's current reorganization began in the Clinton Administration
and moved all of EDA's primary programs to our six regional offices. I
would note that contrary to your question, there is only a very small
national research and similarly small national technical research
program operated out of the Washington office. EDA's continuing
reorganization, which began in 1998, simply brings Headquarters
structure and staffing in line with its reduced role as per the 1998
EDA reauthorization and decentralizes the one remaining mainline
program that is still administered out of the Washington office, the
Trade Adjustment Assistance for Firms program. One of the primary
advantages, of course, of EDA's proposed decentralization is that EDA
can incorporate TAA for Firms into the operations of the regional
offices, reaching more potential firms and presenting to communities a
more complete portfolio of programs to spur economic growth.
I would also note that EDA's proposed decentralization would not,
as you state, require ``petitioners work through both the TAA Centers
and the EDA Regional office''. As it is now, petitioners have no
contact with EDA Headquarters. It is the TAA Centers that deal with
Headquarters--and would deal with the Regional Office under the
reorganization. There is no additional layer of management, just an
administrative change of where the TAA Centers receive approval, and
the movement of decisionmaking authority to the regional level, closer
to the people the program serves.
As you correctly note, the service delivery of the TAA for Firms
program occurs through the network of TAA Centers across the nation--
these are the entities, funded by EDA, that work directly with eligible
firms and serve as liaison with EDA. EDA has no intention of changing
this service delivery model.
EDA regional offices will incorporate TAA for Firms-related
functions (primarily petition certification, adjustment proposal
approval and annual grant processing) into their workload. With an
average of only two or three TAA Centers per EDA regional office, the
impact on EDA regional staffing is minimal.
You also raised the critical issue of training and the timing of
the transfer of TAA for Firms responsibilities to our regional offices.
We agree this is a critical issue and we are addressing it in a
methodical and serious manner. The training for the regional personnel
cannot be completed until EDA completes its regulatory update and
develops new guidance, which will be geared toward EDA and TAA Center
staff alike. The current guidance was issued in the early 1990's in
draft form, was never finalized and is outdated. Once the regulations
have been updated, guidance developed and reviewed, we will embark on a
systematic training program for regional staff. After the training is
complete, we will phase in the transition of the duties from
Headquarters to the regional offices over a period of time, keeping
redundant capability in Headquarters for a reasonable period of time.
We anticipate this entire process will not be completed until the end
of this calendar year. We will include TAA Center staff in our plans--
especially when it comes to training our regional staff and we will not
transition the responsibilities until all the pieces are in place, even
if it means delaying the transition.
EDA remains in close communication with the TAA Centers. Senior EDA
staff will be meeting with Center directors in June and again in
September to keep them apprised.
______
Responses by David Sampson to Additional Questions from
Senator Murkowski
Question 1. You have been in office a few years now, and have had
an opportunity to look at how well EDA's grants have worked in many
different areas. What examples can you provide of the best result in
terms of economic development?
Response. The best grants are ones that bring local government and
business together to create higher-skill, higher-wage jobs and spur
private sector investment. When a community expresses interest in EDA
funding with a united front of community support and private business
need, results are invariably positive. This does not necessarily
meaning coming to EDA with a ``bird in hand'' prospective business,
rather it is a clear line of communication between local elected
leaders and the business leaders on the forward looking, market-based
decisions on what is needed to move the regional economy forward.
There are two recent examples that illustrate the important role
EDA can play in supporting economic development efforts include.
Recently EDA announced a $1,800,000 investment in Kettering University
in Flint, Michigan to construct a Fuel Cell Systems and Powertrain
Integration Center. This investment will help develop create a business
incubator to create both individual business applications of this
critically important energy need and a trained workforce. This
investment will help create 704 new jobs and attract $158,000,000 in
private sector financing. This project ties in all aspects of the
community: business, local and state leaders, universities, and high
technology sectors. It highlights how EDA is on the leading edge of new
forms of economic development.
The second is a recent $2,000,000 investment in the town of
Hayneville, Alabama. This town is Lowdes County which was the
birthplace of the civil rights movement but has had tremendous economic
distress. It is one of the 100 poorest counties in the Nation. EDA was
able to recently invest in basic infrastructure to support the town's
first industrial park. This town has already attracted a tier one
supplier of the new Hyundai plant. The 200 higher-skill, higher-wage
jobs created will significantly raise the standard of living for this
community.
Question 2. Are there any grants you regret having made? If so, how
do you plan to avoid similar cases in the future?
Response. This is an interesting question. Rather than singling out
a grantee perhaps I should mention a line of grant making that I
believe EDA should not be involved in absent compelling job creation
figures. Specifically, there are often requests for EDA assistance to
make ``downtown pretty again.'' When EDA's budget was more robust it
was able to participate in street beautification and other efforts more
closely related to `community' development. However, the realities of
our smaller budget and more competitive grant process dictate that EDA
concentrate on projects that have a direct impact on the creation or
retention of higher-skill, higher-wage jobs.
Question 3. I understand EDA's results have led to a good rating
for effectiveness from OMB. What factors do you feel influenced OMB's
opinion? Have these resulted from changes to the agency during your
tenure?
Response. OMB has recognized the focus this Administration has
placed on improved management efficiencies and effectiveness. The
efforts EDA has undertaken during the past 3 years, resulting in
significantly improved business management and grant performance has
been duly noted by OMB in the form of their good rating of EDA's
management and effectiveness. This has also led to the President's
request--for a second year--for increased funding for EDA. In fiscal
year 2000, EDA commissioned a workforce analysis conducted by Booz-
Allen and Hamilton and applied its findings by re-evaluating its
workforce, mission, and overall strategy. As a result of the study, EDA
successfully undertook a major headquarters restructuring effort that
reduced staff and streamlined operations without any involuntary
separations.
EDA adopted investment criteria that clarify the kind of projects
EDA will fund in order to achieve its mission and goals and focused on
utilizing limited resources on projects that have regional impact and
support competitiveness. EDA has adopted a balanced scorecard framework
that integrates management and performance objectives into its strategy
and EDA uses these performance measures to monitor progress. The
balanced scorecard is an innovative management tool that EDA has
successfully adapted to be one of the first public agencies to use in
the government sector. The EDA has adopted this leading edge tool to
help manage its work and drive improved performance for the taxpayer
and grant recipients.
EDA's increased performance is so remarkable that Dr. Robert S.
Kaplan of Harvard Business School and Dr. David P. Norton of Balanced
Scorecard Collaborative, inventors of the Balanced Scorecard, included
a case study on it in their latest book as a best practice for the
private sector as well as other government agencies.
The application of these efforts has resulted in a consistent level
of funding to rural and urban areas (approximately \2/3\ rural and \1/
3\ urban), and significantly increased levels of private sector
investment and job creation without disadvantaging otherwise worthwhile
projects with limited private investment or minimal job creation.
EDA also undertook a variety of other program improvements. EDA
reviewed its Government and Performance Results Act (GPRA) performance
measures. Certain processes were eliminated and replaced with outcome-
oriented measures. Verification and validation procedures were
implemented to ensure the accuracy and validity of all data reported.
EDA has also incorporated performance as an element of the funding
formula for Trade Adjustment Centers and is piloting a program to
competitively award University Center grants on a 3-year cycle.
Question 4. EDA has been active in attempts to convert closed
military bases to productive civilian uses. We are likely to face a new
round of base closings in the relatively near future. Is EDA ready for
that and what resources are needed to effectively redevelop these
bases?
Response. EDA has learned a great deal from the last base closing
round and is prepared to apply these lessons in a positive manner for
affected communities for any future base closings.
Sections 202 and 209 of EDA's legislation provide expansive
legislative authority to EDA to rapidly and effectively address the
economic impact of a military base closing. This legislative language
is broad by design to allow EDA to accommodate the wide range of
economic development challenges posed by base closings.
EDA has a very close working relationship with the Office of
Economic Assistance (OEA) at the Department of Defense and expects
smooth and efficient execution of any projects it undertakes in
partnership with OEA. With the existing EDA grant processing and
monitoring system, EDA's operational infrastructure is fully scaleable
to accommodate an increased appropriation to fund a new round of base
closings just as EDA has increased the scale of its operations to fund
economic recovery from natural disasters or industries affected by
environmental regulations.
Although Congress is currently debating the future of base closing,
EDA stands ready to assist and will be developing a FY06 budget to
accommodate a potential BRAC. EDA will welcome your assistance in
making sure EDA has the necessary resources to get the job done
correctly.
The EDA success with the reuse of Fitzsimmons Army Hospital is a
great success story. EDA has invested $15 million supporting the
economic reuse of the former Fitzsimmons Army Medical Center. EDA has
awarded grants to the University of Colorado, the Fitzsimmons
Redevelopment Authority and the city of Aurora to assist with the
redevelopment of the 577-acre site into a new campus for the University
of Colorado Health Sciences Center and the Colorado BioScience Park in
Aurora. The Bioscience Park is the major commercial component of the
Fitzsimmons Redevelopment Plan and will contain research-oriented
bioscience and biotechnology companies seeking a planned business park,
in close proximity to an academic medical campus. The park will be the
first of its kind, west of the Mississippi. Total EDA investments have
amounted over $15 million. Private investment is expected to be $1.2
billion and job creation is estimated at 12,000.
Moreover, EDA was so impressed with the work done at Fitzsimmons
that it has hired Robert Olson as the EDA Denver Regional Director (a
career SES position). Olson led the highly successful redevelopment of
the Fitzsimmons Army Hospital in Colorado and will be a tremendous
asset to EDA during the next BRAC round. Bob Olson's in-house expertise
will be invaluable as EDA prepares to address issues surrounding making
closed military bases more attractive to private industry.
Question 5. I am somewhat concerned about the possibility that
funding may be decreased for the Northwest Trade Adjustment Assistance
Center, which provides services to a number of Alaskan entities. It is
my understanding that requests for assistance already far outweigh
available funds even without a change. What are you doing to address
this issue?
Response. President Bush's proposed a 25 percent increase in
funding for FY04 for Trade Adjustment Assistance (TAA). The Congress,
however, provided a 16 percent increase. While less than the
President's request, this increase will enable the TAA Centers which
administer this program, to address the serious backlog of projects.
Upon our arrival at EDA, we discovered that the allocation between the
12 Trade Adjustment Assistance Centers was not based on any objective,
consistent formula. Rather, the distribution among the TAA Centers was
modified yearly in an ad hoc manner. In 2003, EDA worked closely with
the 12 TAA Centers to remedy this situation and jointly developed a
standard funding methodology. All TAA Centers, including the Northwest
Trade Adjustment Assistance Center participated in is the process.
Developing a funding methodology is a difficult process, and this
proved to be no exception. However, EDA was very pleased to achieve an
exceptionally high level of consensus among the TAA Centers with the
new methodology. We believe that the increased funding and refinement
of its allocation will greatly help the administrative feasibility of
this program.
Question 6. EDA is very focused on regional economic development
these days. While I understand the strong desire to redevelop depressed
industrial areas, there is also a great deal of need in more rural
areas. What steps are you taking to ensure your approach is balanced?
Response. The data shows that EDA has and continues to be a strong
supporter of investment in rural America. EDA staff takes great care to
ensure a proper balance of rural and urban projects. Over the last 5
years, EDA has, on average, invested 66 percent of its annual
infrastructure appropriations in projects in rural communities.
Additionally, EDA has significant outreach to rural communities through
regional summits and forums to expand EDA's technical assistance and
reach communities that may have had very little exposure to EDA in the
past. EDA has also funded a major study with Harvard Business School
professor Michael Porter to address the issue of competitiveness in
rural U.S. regions and will use nearly 65 percent of its National
Technical Assistance and Research budget to fund additional cutting-
edge studies on rural economic development in 2004.
Economies are not hermetically sealed in artificial political
boundaries. The dominant reality of economic development today is that
all communities, cities, towns and counties alike, must think
regionally and pool their resources to build a strong economic platform
for growth. By pooling their resources regionally, communities can
attract the private sector investment necessary to spur job creation,
because it is the private sector that creates jobs and spurs economic
growth.
Question 7. I understand you have strong feelings about technology
development as a driver for economic development. What is EDA's role in
this area?
Response. EDA's mission statement is ``to lead the Federal economic
development agenda by promoting innovation and competitiveness,
preparing American regions for growth and success in the worldwide
economy.'' It is clear that innovation and investment create high-wage
jobs and improve our standard of living. Innovation is the key to
prosperity. As a result, government must reinforce, rather than
obstruct, the process of bringing innovations to the marketplace. That
is why EDA and the Administration continues to fund investments,
initiatives, and research that furthers innovative activity, such as
unique capabilities of national labs and universities, including
establishing cooperative research programs for the benefit of small and
medium-sized businesses. In addition, the Bush administration is
promoting manufacturing technology transfer to ensure that the benefits
of R&D are diffused broadly throughout the manufacturing sector,
particularly to small and medium enterprises.
The private sector and the Bush administration recognize the need
for continuing investment in research and development (R&D) of new
products to remain ahead of the competition. The U.S. leads the world
in innovation. Investments in technology create new industries and
careers in U.S. firms that introduce products, create jobs, and spur
economic growth. America's competitive edge flows directly from
innovation and rising productivity. Job creation is increasingly
dependent on innovation. The U.S. private sector spends $193 billion on
R&D, while the Federal Government is investing more than ever in
research by spending a record $126 billion this year and a proposed
$132 billion in fiscal year 2005, a 42 percent increase of 2001.
Today's labs are generating the industries of tomorrow.
One of EDA's key objectives is to enable communities to increase
their standard of living, thus becoming more prosperous. Technology-led
economic development has successfully shown that it raises a
community's standard of living by creating higher-skilled, higher-wage
jobs. Communities prosper and grow and are successful when they
innovate, and innovation is often tied to technology. Although
innovation and technology development are not mutually exclusive,
technology is an area of competitive advantage for communities and the
country when it is pursued, developed, and meets a market need. It is
important to note, however, that EDA's support for technology-led
economic development does not limit EDA to new and emerging industries.
Established, core industries must continue to adopt new technologies
and look for innovative solutions in order to remain competitive. EDA
has a strong commitment to working with those regions that are working
to upgrade their core industries in order to enhance their
competitiveness.
Question 8. We have talked before about the need to find a way to
support small-scale projects in remote rural areas as a way of
generating business activity and stimulating employment appropriate to
the circumstances in those areas. Are you taking specific steps to
encourage such programs equally to the more traditional, large-scale
bricks and mortar projects?
Response. First of all I believe that bureaucracy should not get in
the way of good economic development projects. For that reason, I
believe the Special Impact Areas legislative language has been included
in the Administration bill and the bill passed by the House. This
language will allow EDA, in unique circumstances to wave the necessity
for a Comprehensive Economic Development Strategy (CEDS) under
compelling circumstances such as those faced by the extremely rural
communities you represent. This CEDS requirement can, in some
instances, significantly delay EDA funding for a given project in a
small community--even when it is generally accepted by all parties as
being the critical project for that local community. I urge the Senate
to approve this limited authority to get EDA dollars to support good
small projects in small Native American Communities. This language will
allow EDA to create more small scale projects in hard to reach
communities.
__________
Statement of Gary Gorshing, Executive Director, South Western Oklahoma
Development Authority and President, National Association of
Development Organizations
EXECUTIVE SUMMARY
The Economic Development Administration (EDA) is a vital Federal
resource for distressed areas striving to improve their local economies
through private sector job growth. This applies to localities
struggling to overcome both long-term economic challenges and sudden
and severe hardships caused by manufacturing plant closings, military
base closures, natural disasters, declines in core industries and other
related events.
The Economic Development District planning program is a proven and
essential resource for our nation's distressed communities,
particularly in small metropolitan and rural America. As stated in a
2002 program evaluation by Wayne State University, the national network
of 320 planning and development districts has built a notable record of
facilitating a comprehensive strategic planning process that ``provides
the critical backbone for economic development planning at the local
level.''
The EDA public works program provides valuable financial assistance
to build, rebuild or expand the basic public infrastructure needed to
develop new businesses or retain existing companies. The average EDA
public works investment is typically leveraged ten to one by the
private sector, according to an in-depth study by Rutgers University.
Long-term jobs have been created and retained historically at an
average cost of $3,058 per job, among the lowest ratios in government.
The EDA Revolving Loan Fund (RLF) program is a powerful and
essential economic development tool for addressing the credit gaps that
exist in distressed communities, particularly in underserved rural
areas. By using limited public funds to leverage private capital,
locally managed RLFs are providing business capital to thousands of new
and existing companies that have difficulty securing conventional
financing.
Thank you, Mr. Chairman and members of the committee, for the
opportunity to testify today on issues related to the reauthorization
of the Economic Development Administration (EDA).
My name is Gary Gorshing. I am the Executive Director of the South
Western Oklahoma Development Authority (SWODA), headquartered in Burns
Flat, and I also currently serve as the President of the National
Association of Development Organizations (NADO).
In my testimony, Mr. Chairman, I plan to discuss the unique role
EDA plays within the portfolio of Federal economic development
programs. I will highlight the impact of EDA investments at the local
level and demonstrate the overwhelming value of the planning, public
works, revolving loan fund and economic adjustment assistance programs.
While NADO strongly supports the compromise bill (H.R. 2535) adopted by
the US House of Representatives in October 2003, I will also offer some
modest suggestions to improve and clarify the legislation from the
regional and local perspective.
ABOUT NADO AND SWODA
The National Association of Development Organizations (NADO)
provides training, information and representation for regional
development organizations serving the 82 million residents of small
metropolitan and rural America. The association, founded in 1967 as a
national public interest group, is a leading advocate for a regional
approach to community and economic development. NADO is part of the
intergovernmental partnership among Federal, state, regional and local
officials. The association is also a member of the Coalition for
Economic Development, a consortium of national organizations working to
advance the goals and mission of the Economic Development
Administration. The coalition includes representatives of regional
councils of government, city and county officials, economic development
councils, EDA university centers and community-based nonprofits.
NADO members-known locally as councils of government, economic
development districts, local development districts, planning and
development districts and regional planning commissions--provide
administrative, professional and technical assistance to over 2,000
counties and 15,000 small cities and towns. These organizations
administer and deliver a variety of Federal and state programs. Based
on local needs, programs may include aging, census, community and
economic development, emergency management planning, homeland security,
housing, small business development finance, transportation and work
force development. A policy board of local elected officials, business
leaders and citizen representatives typically governs each regional
organization. Associate members of NADO include state and local
agencies, educational and nonprofit organizations, businesses and
individuals.
The South Western Oklahoma Development Authority (SWODA) serves
eight counties, 46 cities and towns, and ten conservation districts
within the region. In addition to providing planning and technical
assistance to local communities, SWODA delivers aging services as an
Area Agency on Aging; administers four loan programs including USDA
Intermediary Relending Program (IRP), SBA 7A loan Guaranty Program, SBA
504 loan program and a SWODA revolving loan fund; manages the 3,000-
acre Clinton-Sherman Industrial Airpark, a former defense facility;
administers local Workforce Investment Act programs; and assists local
communities with EDA, USDA and HUD Community Development Block Grant
proposals, capital improvement planning, rural fire defense
initiatives, solid waste projects, historic preservation efforts and
other community development initiatives.
We believe, Mr. Chairman, there are four major reasons for the
committee to support a multiyear reauthorization of the Economic
Development Administration (EDA).
1. EDA has a unique and clearly defined role within the broad
portfolio of Federal economic development programs.
2. The EDA planning program for multi-county economic development
districts is a proven, costeffective and essential resource for the
nation's distressed communities, particularly in small metropolitan and
rural regions.
3. The EDA public works program is a flexible and vital resource
for helping distressed communities develop the most fundamental
building block for economic development--public infrastructure.
4. The EDA Revolving Loan Fund (RLF) program is a powerful and
indispensable economic development tool for addressing the credit gaps
that exist in many distressed communities, especially in underserved
small metropolitan and rural areas.
First, Mr. Chairman, the Economic Development Administration (EDA)
has a unique and clearly defined role within the broad portfolio of
Federal economic development programs. As the only Federal Agency
focused solely on private sector job growth and sustainability, EDA is
a vital resource for distressed communities striving to improve their
local economies. Whether it is through infrastructure grants, strategic
planning assistance, business development capital or technical
assistance, EDA investments are designed to promote economic
opportunities in impoverished communities. Most importantly, EDA
investments are typically the seed funds or gap financing that make
locally identified projects a reality in the nation's poorer areas.
Over the years, the Agency has developed a strong record in
assisting communities who are struggling to overcome both long-term
economic challenges and sudden and severe hardships. Through its full
range of program tools, the Agency has been uniquely positioned to help
areas recover from military base closures, manufacturing plant closings
and job losses, natural disasters and declines in natural resource-
based industries like coal, fisheries and timber.
The Agency has also developed important partnerships at the state,
regional and local levels. These relationships with regional
development organizations, local governments, Tribal governments,
universities and others are an essential part of carrying out the
Agency's traditional ``bottom-up'' philosophy. As reinforced in various
academic studies and evaluations, EDA investments are among the most
efficient and cost-effective in government because they originate from
a local planning process, require a substantial financial match from
local grantees and focus on private sector job creation.
At a time when Congress must make difficult choices on Agency
budgets, EDA is an Agency that merits the full support and commitment
of the committee. Therefore, we respectfully urge the committee to
develop and approve a multi-year reauthorization bill that maintains
the Agency's current mission and program focus of helping bring
economic opportunities to all of the nation's distressed communities,
with a special emphasis on small metropolitan and rural America.
Second, Mr. Chairman, the economic development district-planning
program is a proven, cost-effective and essential resource for our
nation's distressed communities, particularly in small metropolitan and
rural regions. As reported in a 2002 program evaluation by Wayne State
University, the national network of 320 economic development districts
has developed an impressive record of facilitating a comprehensive
strategic planning process that ``provides the critical backbone for
economic development planning at the local level.''
By leveraging modest EDA planning funds with local dollars, these
multi-county development districts provide vital professional,
administrative and technical assistance to local government officials,
business leaders, nonprofits and communities. This is particularly true
in small metropolitan and rural regions where local governments often
lack professional staff capacity. According to a 2001 study by the
National Association of Counties, over 60 percent of metropolitan
counties have full-time economic development staff, compared to only 34
percent of rural counties. Furthermore, nearly 85 percent of the
nation's 39,000 units of local government serve populations below 5,000
and almost 30 percent have no professional staff. As a result, most of
the nation's smaller communities rely heavily on EDA-funded planning
and development districts for professional and technical support.
As part of the Comprehensive Economic Development Strategies (CEDS)
process, districts bring local elected officials, business leaders and
community representatives together to prepare and implement strategies
aimed at helping a multi-county region become or remain full
participants in the nation's economic mainstream. Whether a region is
currently enjoying economic stability or coping with long-term
challenges such as declines in traditional industries, it must prepare
for tomorrow or risk falling behind in today's competitive global and
high-tech marketplace.
Districts are now engaged in comprehensive planning and
implementation that reflects the dramatically changing national and
global economy. Today's regional plans may encompass strategies for
using technology as an economic development tool, building local work
force capacity in distressed areas and enabling communities to
diversify economies. In addition to the planning functions, districts
spend a significant amount of time and staff resources helping local
communities administer and package public and private sector financing
for projects, navigate the reams of bureaucratic red-tape, and collect
and analyze the data needed to make informed and educated decisions.
With advanced technologies, such as Geographic Information Systems
(GIS) and Global Positioning Systems (GPS), many districts are now
providing state-of-the-art assistance to local constituents. While the
possibilities for GIS are almost endless, activities range from mapping
areas with failing septic systems in order to identify areas where
alternative treatment systems are needed, to simulating the land use
and environmental impact of business locations in a specific area, to
marketing and showcasing business parks over the Internet. As noted in
the 1998 House committee report on EDA reauthorization, EDA should be
encouraged to further enhance GIS-related activities of the districts.
The Southeast Tennessee Development District offers a good example
of the power of comprehensive planning. McMinn County, located in the
southeast corner of the state, was facing overcrowded jails, an
overflowing landfill and growing debt. Over a 10-year period, the
district facilitated a strategic planning process with county leaders
to address these pressing needs. After implementing ideas developed
during the planning process, the county is now debt-free and follows a
pay-as-you-go policy. As a result, the county is now in a better
position to pursue new economic opportunities, such as the expansion of
NuMarkets, a consignment seller for e-Bay that plans to expand from 21
workers today to at least 300 in the next 2 years.
The planning districts in Oklahoma, including SWODA, are using GIS
and GPS technologies to develop capital improvement plans for local
governments, a process that requires inventorying of all public assets.
By cataloging and mapping every road, bridge, water line, public
building and other assets, the districts can create visuals and data
for local elected officials and business leaders who are developing
economic development strategies. The information can also be used for
transportation planning, zoning decisions, land use management,
disaster mitigation planning and an endless list of other activities.
Without the expertise and capacity of the districts, most local
jurisdictions would never have the economies of scale, resources or
skills required to engage in this important visioning activity.
In Missouri, the Boonslick Regional Planning Commission leveraged
EDA planning resources to lead an effort to craft a Comprehensive
Economic Development Strategy for its region in the late 1990's. The
planning process resulted in several new ambitious goals for the Agency
and the region to pursue. Four of the top goals involved establishing
affordable housing opportunities for working families, securing
resources for infrastructure improvements, enhancing services for
special populations within the region, and creating a financing tool to
help local banks support business growth and job creation. Since the
creation of the CEDS, significant progress has been made toward
achieving these four goals.
The Boonslick Regional Planning Commission has worked with local
communities and developers to improve affordable housing opportunities.
Thirty-six new homes have been built for families working in the
region. These homes are 1,200 square feet and were sold for less than
$80,000. Down payment assistance was provided to help homebuyers secure
conventional financing. Additionally, the region has completed
renovations on more than 60 housing units, improving the housing
quality for working families in rural communities.
To assist special populations, the planning district helped with an
innovative project that provides public transportation services in
Lincoln County. The system, know as The Linc, provides public
transportation Monday through Friday for any resident of Lincoln
County. Since its inception in 2002 The Linc has provided more than
12,000 trips. Fifty-four percent of these trips are for employment.
Individuals that could not work because of transportation limitations
are now able to hold full-time positions because of the availability of
public transportation.
The Boonslick RPC has been working diligently to secure financing
to assist communities improve and expand their infrastructure to
support economic growth in the region. Since the CEDS was completed,
more than $30 million has been invested in local infrastructure
projects. The organization also created a new revolving loan fund (RLF)
to assist local banks finance business startup and expansion. The
district leveraged $200,000 in local money with $300,000 from EDA and
$100,000 from the State of Missouri. Since the fund was created 2 years
ago, the RLF has loaned $580,000, helped create or retain 170 new jobs,
and leveraged private investments of more than $3.5 million.
The Northeast Oregon Economic Development District has also worked
to diversify the economy of its rural region. The group established
Enterprise Facilitation to increase community capacity by promoting
local entrepreneurship and assisting individual startups, business
improvement and expansion planning. The program draws on the expertise
of a volunteer local board and facilitator to help each entrepreneur
build a support team with the strengths to cover business development
areas, such as marketing and financial management. The program has
served 264 entrepreneurs, 15 startups and 11 business expansions with
job creation. The organization has leveraged public and private sector
funds, including EDA, to maintain the initiative.
In central Pennsylvania, SEDA-COG established a resource center
that helps organize partnerships for community success, achieve local
development objectives and shape community identity through town
planning and urban design. The project is the culmination of a regional
effort to strengthen bonds between Lewistown and the surrounding
municipalities. By placing downtown development in the context of a
regional community, this initiative breaks new ground for small town
conservation and economic development. It has stimulated a constructive
dialog, spawned new regional connections and improved intergovernmental
cooperation. In addition, nonprofit capacity has been enhanced, private
capital has been committed and leveraged, and businesses have benefited
from the resulting downtown-based services and training opportunities.
These examples offer only a small sample of the impact and
achievements of the nation's 320 EDA designated economic development
districts. These locally--controlled organizations have consistently
demonstrated the indispensable value of EDA planning grants. Although
the average $54,000 grant for each district is small by Washington
standards, it means a world of difference to the thousands of rural
counties and small towns served by the program. Unfortunately, the true
purchasing power of the district planning money has been eroded over
the past 30 years to less than 15 cents on the dollar. In addition, the
limited pool of resources has been stretched in recent years as the
Agency tries to assist designated-but-unfunded districts across the
country.
As mentioned above, the comprehensive evaluation conducted by Wayne
State University's Center for Urban Studies in 2002 found that
districts are both effective and essential to local development. The
summary of the report frames the work of the districts best by stating,
``economic development districts have been effective instruments
promoting cooperation, coordinating needs assessments, and through the
CEDS [Comprehensive Economic Development Strategies] process,
generating the kind of regional planning needed to effectively promote
positive economic change.''
To further enhance the performance of economic development
districts, NADO specifically urges the committee to increase financial
resources for the national network of 320 economic development
districts. While the districts have stretched and leveraged their
modest resources for years, nearly 30 years of inflation costs and new
program demands make a modest funding increase a top priority.
NADO urges the committee to maintain and strengthen the leadership
and coordinating role of the economic development districts in the
crafting of regional and local Comprehensive Economic Development
Strategies. This includes retaining the revised planning performance
bonus incentive established in the House bill (H.R. 2535). This modest
bonus of 5 percent for public works and economic adjustment projects is
an important incentive at the local level to promote and facilitate
regional cooperation of local communities. While it is often easy to
preach and talk about regional cooperation, the reality is frequently
more difficult to achieve.
In addition, the association and its members remain concerned that
there is a misunderstanding of the value and role of the planning
program at the regional and local levels. Historically, EDA planning
grants have been used to help regions develop comprehensive development
strategies, which is an important and critical mission. But their more
important outcome is the professional and technical capacity developed
at the local level within the economic development districts. Without
the flexibility and expertise of the districts, most local communities
would severely lack the ability to pursue new economic opportunities,
have the skills to package complex development deals and navigate the
burdensome and intricate reams of Federal and state paperwork.
Therefore, we ask the committee to ensure that the district-planning
program will remain a vibrant and flexible resource for local areas.
Third, Mr. Chairman, the EDA public works program is an essential,
flexible and cost-effective partner for helping distressed communities
develop the most basic economic building block--public infrastructure.
Year after year, local elected officials and economic development
professionals in rural and small town America identify infrastructure
development as their primary concern for economic development. While
there are other Federal programs, such as the HUD Community Development
Block Grant program, USDA rural development and the EPA clean water and
drinking water funds, the EDA public works program is the only program
focused solely on projects tied to private sector job growth and
sustainability. It is also different because it is a cost-sharing grant
program targeted directly at distressed local communities, unlike many
of the other Federal programs that either are administered by the
states or only offer loans and loan guarantees to communities already
financially strapped.
The value and success of the EDA public works program has been
validated repeatedly over the years. Traditionally, the average EDA
infrastructure investment has been leveraged ten to one by the private
sector, according to an in-depth study by Rutgers University. More
importantly, EDA projects help distressed communities create quality
long-term jobs at an average cost of $3,058 per job, which is among the
lowest and most efficient in government. The Rutgers report underscores
that the near perfect on-time completion of EDA public works projects
is the direct result of the planning phase that precedes the project
selection.
Throughout its history, EDA has also been recognized as a national
leader and innovator in the economic development field. Many cutting-
edge practices have emerged from the public works program, such as
business incubator buildings, smart technology parks, eco-industrial
parks, and the redevelopment of brownfields. Without the financial and
technical support of EDA and its local partners, most distressed
communities in small metropolitan and rural America would never have
the opportunity to implement these essential infrastructure-related
projects.
In my home region in Oklahoma, EDA has made several valuable
investments. In 1992, for example, the city of Clinton received
assistance from EDA to help meet an overwhelming need for expanded
sewer treatment. Without this assistance, it is most certain that BAR-S
Company, a major local employer, would have been forced to close its
plant in Clinton. This would have resulted in the loss of approximately
400 quality jobs in our very rural region.
In Tennessee, EDA invested $1.5 million in public works money to
partially finance water system improvements at the North Etowah
Industrial Park. The project allowed a brake manufacturer for the
automotive and truck industry to commence production operations of its
second state-of-the-art facility in 2001. The EDA project also helped
locate a second automotive supplier in a spec building within the
industrial park.
Since the completion of the EDA financed infrastructure
improvements, the city of Etowah has realized an 18 percent increase in
its local tax base. Moreover, given the quality of the companies and
the higher-than-average wages ($12 per hour or better) the per capita
income increased from $16,924 to $20,395. Recently, the two businesses
have announced expansion plans due to upcoming regulatory changes in
the automotive industry. The changes are expected to generate an
additional 250 jobs coupled with a $115 million private sector
investment.
EDA invested nearly $3 million in infrastructure improvements to
sustain a major local industry in Montana. A local company constructed
a $550 million plant in Silver Bow, just west of Butte. The company
converts metallurgical-grade silicon into silane gas and
polycrystalline silicon products including rods and chunks. These
products are sold to other companies that use the material to produce
single crystal wafers, which are later sold and used by companies, such
as, Motorola, Micron, and Intel to make semiconductor devices such as
memory chips and microprocessors. Currently, 220 people are employed at
the plant and an additional 60 jobs will be created in this small city.
The average annual salary of the workers is $55,000.
In Florida, EDA is playing an instrumental role in helping the Town
of Altha develop the basic infrastructure needed to support and sustain
existing businesses. EDA contributed about $320,000 of the total
project cost of $823,000 to construct a new water line, upgrade an
existing water line and install a new well and pump. As a result of the
project, Oglesby Plants International, Inc. is committed to creating 15
new jobs and retaining 125 existing jobs.
EDA has also helped the city of Palatka in Florida, a traditionally
distressed community, build the basic infrastructure needed to retain
and attract light industrial and manufacturing firms. The project
involved making improvements to an industrial park, including the
installation of water and sewer lines, a lift station and fire
suppression infrastructure. Among the immediate impacts, Sykes
Enterprises, Inc. will create 423 new jobs and make a private sector
investment of $14 million when they establish operations in the
industrial park. Overall, the project will help the city provide
employment opportunities to unemployed and underemployed workers who
are seeking higher wage jobs.
As part of the EDA reauthorization package, we strongly encourage
the committee to maintain fair and flexible eligibility criteria for
public works grants. This includes retaining the Agency's long-standing
policy of helping the nation's most impoverished communities, with a
special emphasis on small metropolitan and rural communities. We
strongly disagree with any ``one-size-fits-all'' approach that directs
EDA investments to only one type of industry or project, to any one
type of community or to any one type of economic development
philosophy. Over the years, the success of EDA has been rooted in its
``bottom-up'' approach. The EDA public works program is a proven
program that serves as a key catalyst for economic development in
distressed areas. Without it, impoverished communities would struggle
to develop and sustain the infrastructure and facilities needed to
develop new businesses and retain existing companies.
My fourth and final point, Mr. Chairman, is that the EDA Revolving
Loan Fund (RLF) program is a successful and powerful economic
development tool for addressing the credit gaps that exist in many
distressed communities, particularly in underserved rural areas. By
using limited public funds to leverage private capital, locally managed
RLFs are providing business capital to thousands of new and existing
companies that have difficulty securing conventional financing.
Capitalized with an EDA grant, RLFs are managed by public and
private nonprofit organizations (including economic development
districts) and are designed to further local economic development goals
by lending their initial capital and then re-loaning funds as payments
are made on the initial loans. Loans are typically used for fixed
assets or working capital needs. Organizations are also required to
demonstrate how the RLF fits their local needs, as defined in a
comprehensive economic development strategy.
The participation of RLF funds in a business deal usually
encourages once-reluctant banks to also lend, since loan funds normally
agree to let banks recoup their losses first from the business'
collateral in the event of default. By providing such gap financing,
loan funds have been instrumental in the growth of companies that
otherwise would not have received funding.
The approximately 600 RLFs capitalized by EDA play a particularly
critical role in the economic development of distressed rural areas,
where alternatives to conventional financing are limited. In inner
cities, community development corporations (CDCs) and municipal
agencies often manage loan funds. In rural areas, where there are few
CDCs and limited municipal capacity, RLFs managed by regional
development organizations are often the only source of alternative
financing for entrepreneurs and existing businesses. A January 2002
NADO survey of regional development organizations with loan funds found
that half are the sole lender in all or part of their multi-county
service area, underscoring the important role played by public entities
and RLFs in creating private sector jobs in rural America. (For more
details, see the NADO Research Foundation report, ``EDA RLFs Make a
Difference.'')
In a rural region of Missouri, the Meramec Regional Planning
Commission has helped provide business capital to a local company that
has grown into a worldwide supplier of specialty chemicals, materials,
and equipment to micro-electronics and opto-electronics manufacturers.
In 1995, the Meramec RPC supported the company's expansion by making a
working capital loan of $150,000, which in turn leveraged $1.3 million
in private sector funds. Sixteen jobs paying an average of $23 per
hour, much higher than the regional average of $14, were created in the
small town of 16,000. Since 1992, the Meramec RPC has made 37 loans
that have created and saved 758 jobs.
As noted earlier, the Boonslick RPC also established an RLF in 2002
based on recommendations made during the region's strategic planning
process. The most challenging project the RLF has been involved in,
according to the organization's executive director, is the construction
and financing of a local food market, the Loutre Market. The market was
the only grocery store serving the southwest portion of the region. It
was wiped out after floods in 1993 and 1995, and the owners closed the
business. This meant that the southern portion of the county was left
without any grocery.
The community worked for years to attract a new store or owner. A
potential owner was finally located and the community worked with all
possible agencies to make the project work. They included local
financing, Small Business Administration financing and community funds
to try and finance the project. In the end, the group needed $150,000
to complete the $2 million deal. The Boonslick RPC provided the gap
financing that made this project a reality. While this project example
lacks the glamour of many high-priced, large-scale deals, it was a
vital endeavor for this rural region. Without a local food market, it
would be extremely difficult to retain existing businesses let alone
attract new employers.
The decline of southwest Oregon's wood products and fishing sectors
has contributed to the region's unemployment rate of more than 8
percent in recent years. To combat this trend, the CCD Business
Development Corporation--which serves Coos, Curry and Douglas
Counties--has used its loan fund to create and retain over 3,200 jobs
in an array of sectors. One of its borrowers is FCC Commercial
Furniture in Roseburg, now one of the nation's leading manufacturers of
restaurant furniture.
The company relocated from California in 1993 and occupied a vacant
building formerly owned by a defunct log loader manufacturing company.
CCD coordinated a loan deal that included a $115,000 RLF loan to
finance equipment and $395,000 from the organization's other loan
programs and a bank to finance other relocation costs. They hired all
local workers and currently have about 110 employees.
The Genesee-Finger Lakes Regional Planning Commission, based in
Rochester, has used its RLF to support high-wage, high-skills jobs in
various sectors, including the region's struggling printing industry.
The organization's RLF has helped finance the purchasing of software
and high-end computers for high-quality printing. The RLF has also made
loans to growing businesses for working capital. In the past decade,
the fund has made a total of 44 loans to 42 businesses and has created
or saved 920 jobs in this transitioning region.
Despite the effectiveness of locally managed RLFs, the EDA program
could be dramatically improved by implementing several no-cost or low-
cost recommendations:
<bullet> EDA should recapitalize and expand the lending capacity of
existing RLFs that have established a successful track record and
demonstrated demand.
<bullet> A new technical assistance program should be added to
complement the loan fund program to better safeguard the investments
made by RLFs. The Agency should allow a limited amount of RLF grant
funds to be used for professional development training and continued
education of RLF managers.
<bullet> The EDA RLF program should emulate other Federal loan
programs and defederalize RLF moneys once they have been loaned out and
repaid one time. Defederalization will reduce paperwork and regulatory
burdens, while still requiring local accountability. It would also
lessen the oversight responsibilities of EDA, which are currently
perpetual for the Agency.
<bullet> The Agency should lower or eliminate the requirement that
75 percent of funds be loaned out at any one time. This mandate is
particularly burdensome during slow economic times and in rural and
remote regions. At a minimum, the Agency should have the flexibility to
deal with hardship cases. By mandating the 75 percent requirement, the
Agency runs the real risk of forcing local RLF policy committees and
managers to make investments in unsound and the riskiest of deals.
CONCLUSION
In closing, Mr. Chairman, I want to reinforce NADO's support for a
multi-year reauthorization bill that maintains EDA's current mission
and program focus of helping bring economic opportunities to our
nation's impoverished communities, particularly small town and rural
America. Through its existing programs--including the planning, public
works and economic adjustment programs--the Agency serves as a vital
resource for localities striving to improve their economies through
private sector job growth. The Agency should retain the flexibility to
help all of the nation's distressed areas, whether they are struggling
to overcome long-term economic challenges or sudden and severe
hardships. EDA is an Agency that merits the full support the committee.
I also want to state that NADO remains supportive of the Agency's
brownfields redevelopment efforts. In March 2002, NADO member Mary Lou
Bentley of the Western Nevada Development District presented the
association's positions on the issue. The association's leadership also
sent a letter to Ranking Member Jim Jeffords and Senator Carl Levin in
general support of the Brownfield Site Redevelopment Assistance. In the
current Congress, the bill is S. 645.
Most importantly, we strongly support retaining a leadership and
coordinating role for EDA-designated economic development districts
both in the development of regional and local Comprehensive Economic
Development Strategies and the implementation and pursuit of new
economic opportunities at the local level. In the end, economic
development is inherently a locally driven process that requires
regional coordination, collaboration and partnerships. The established
network of economic development districts has proven over time to be an
effective, cost-efficient and professional group that should be further
strengthened and maintained.
Thank you again, Mr. Chairman and members of the committee, for the
opportunity to testify today on the views of NADO and its membership. I
would welcome any questions.
__________
Statement of James J. Saudade, Deputy Commissioner, Department of
Housing and Community Affairs, State of Vermont
Good morning Mr. Chairman and members of the Committee, and thank
you very much for the honor and opportunity to provide testimony to you
today regarding the reauthorization of the Economic Development
Administration (EDA).
My name is James J. Saudade, and I am the Deputy Commissioner for
the Vermont Department of Housing and Community Affairs, Agency of
Commerce and Community Development.
This morning I would like to tell you how important the assistance
available through EDA is to a small, rural state like Vermont. I will
share with you some of our experience with the EDA in Vermont, and
offer some suggestions for making EDA even more effective in rural
parts of our country.
As I am sure my Senator, Jim Jeffords, reminds folks around here
once in awhile, Vermont is a small state that is facing substantial
economic challenges. The median income for a family of four in Vermont
grew only about $500 from 1989 to 1998, our poverty level during that
period actually increased from 8.1 percent to 9.6 percent, and our
share of poverty level jobs increased in the 1990's to fully 25.5
percent of all jobs. While unemployment for much of the state remains
below the national average, Vermont hosts regions of high unemployment
such as our Northeast Kingdom and substantial underemployment is
pervasive throughout Vermont. These are serious conditions that impair
our economic health.
To address these disturbing trends, we have undertaken economic
development planning and projects to stimulate new business, train
workers, and grow the businesses we have. In this effort we have
enlisted the assistance of EDA as our partners to help underwrite the
cost of new infrastructure, capitalize revolving loan funds, and build
small business facilities. In fact Mr. Chairman, as we are meeting here
this morning, the ribbon is being cut on a new business center in St.
Johnsbury, Vermont. A business center that offers new hope for quality
jobs in our most economically distressed region. This center, which is
largely underwritten with EDA funds, resides in an industrial park that
was originally established and expanded with EDA assistance.
Although my personal experience with the EDA has been over many
years, most recently I was very involved with a new, EDA assisted,
business incubator in Randolph, Vermont. This incubator will open in a
few months and is in partnership with Vermont Technical College. It
will offer businesses a supportive environment to become established
and grow. These businesses will derive research and expertise from the
resources of the college and, in turn, provide students and faculty
with a laboratory for fostering technological achievements. And most
importantly, this new incubator will provide jobs in a community that
had been devastated by a series of fires and has suffered several
recent plant closures. Already, several businesses are lined up to
occupy the incubator, including a very promising business working with
new, light emitting diode technology and a software developer.
Both the Randolph and St. Johnsbury projects were planned and
executed in accordance with regional Comprehensive Economic Development
Strategies (CEDS). These CEDS are a requirement for participation in
EDA activities and are a planning feature which I, and the Agency I
represent today, strongly endorse. The process to complete these plans
is arduous, time consuming, and not without cost, but their value for
smart development is indispensable. These plans provide a sobering view
of the current regional economy, a retrospective evaluation of previous
development, an inventory of available resources, and most importantly,
a solid plan for action. The process draws in the interests of
planners, businesses, community interest groups, and government and
ensures that broad representation is a feature of the planning process.
While EDA has always provided helpful materials to regions in support
of these plans, I would like to commend EDA on its much-improved web
site that now provides a wealth of information, resources, and
contacts.
As previously stated, the Vermont Agency of Commerce and Community
Development endorses the development planning required by EDA. In fact,
we now look to those plans, where they exist in Vermont, to make
investment decisions regarding the deployment of state resources. When
a project comes to the state for assistance from a region where a
comprehensive plan was completed, we ask where that project is in the
regional plan, how does it help fulfill the goals of the plan, and what
strategic opportunities identified in the plan are captured by this
project? In order to make this policy effective statewide, we have
recently issued 2005 work plans to regional agencies making the
completion of regional economic development plans a top priority where
they currently do not exist.
The array of assistance products provided by EDA has helped to
address many of Vermont's economic development requirements and,
without them, there would be no alternative. The public works
assistance has been vital in underwriting infrastructure improvements.
The Economic Development District program has helped the Northeast
Kingdom to plan projects in this very rural and distressed region of
Vermont. And the Revolving Loan Program has provided credit enhancement
and gap financing to hundreds of Vermont's small businesses. But as
effective as these products have been to our work to regain economic
vitality, we look forward to implementing the elements of our regional
economic plans not yet accomplished and to fulfilling the promise of
the regional plans not yet completed.
This week, perhaps as I speak, adjustments to our state's limited
liability program for brownfields reclamation are being considered in
our state legislature. I believe the improvements under consideration
will result in a watershed of new interest in our existing brownfields
sites. With over 2,000 known brownfields in Vermont, we will need the
help of the EPA and EDA to help us remediate and reuse these areas.
Returning these sites to productivity is crucial to our need for jobs,
critical to the stability of our town and village centers, and
protective of our yet unspoiled landscapes.
Vermont is a rural state and its character is very different than
urbanized areas of the country. As such, we sometimes find ourselves
working within constructs of the Federal Government that do not work as
well as they might in more populated states. This is true with EDA. We
would recommend that EDA allow some discretion in the design and
implementation of its programs to absorb inherent differences that
exist across the country, and particularly in small states. For
example, EDA and other agencies look to counties as important
representations of regional boundaries. In many states where county
governments conduct a wide range of governmental functions this makes
sense. However, in Vermont, although counties exist as representations
on maps and for judicial and law enforcement purposes, there are no
``county governments.'' EDA would be better served by a more flexible,
working definition of regional boundaries.
Similarly, small states cannot begin to garner the resources that
larger states are able to assemble in support of economic development
activities. Again, flexibility in the goals of EDA programs would allow
for more realistic and scaled expectations for smaller states. For
instance, EDA would like to achieve leveraging ratios of 22:1 of
``other funds'' to EDA dollars. This level of leveraging, though
laudable, is simply unattainable in Vermont and threatens to make EDA
an anachronism in our state.
Rural states also have a more difficult time fielding committees
such as those required in developing economic plans. It is difficult to
find enough people who are able to commit the time and energy to serve
on required boards and, in Vermont, it is impossible to supply the
diversity that might be attainable in other states. EDA has with great
difficulty, accepted some variation on its model for public
participation but, while we understand the need to be accountable to
all of our constituents, additional flexibility is warranted.
Also characteristic of very rural states is the lack of
professional staff for small communities and the logistical obstacles
to attending meetings, accessing program representatives, and
maintaining good contacts. The EDA relies heavily on regional
representatives. These EDR's as they are known are responsible for
large geographic areas that prohibit frequent visits and limit
accessibility. This dependence on very few individuals to provide both
technical expertise and firewall review of new proposals for a huge
area does not do justice to the otherwise well thought out EDA system
of resource deployment.
We would also appreciate an improved EDA application process that
did not place project viability in the hands of one person initially,
and also allowed for the capture of time sensitive and unusual, but
creative projects. The existing application process is multi-tiered,
and cumbersome. The process tends to delay if not defeat projects that
either require quick action, or offer new and innovative approaches to
traditional problems. We recommend a ``special review'' process for
applicants that can demonstrate a need for an extraordinary procedure.
We might also suggest a closer partnership with EDA field
representatives to state, community development departments. In
Vermont, as is the case in most states, development department staff
have become proficient in the review and administration of CDBG small
cities projects and may offer EDA some assistance in extending field
capacity and offering support to EDA field staff.
In conclusion, we enthusiastically recommend reauthorization of
EDA. While we would recommend flexibility and discretion in applying
program standards to small states, EDA's major program features are
sound, its products are invaluable, and Vermont's economic distress
would become further exacerbated without EDA support. EDA has and is
providing resources that we could not otherwise replace, and we look to
a re-authorized and invigorated EDA to help shape Vermont's economic
future.
Statement of R. Charles Gatson, Vice President and Chief Operating
Officer, Swope Community Builders
Chairman Inhofe, Senator Jeffords and Members of the Committee,
thank you for inviting me to testify in front of your committee on the
Economic Development Administration reauthorization bill. I want to
particularly recognize Senator Bond who has been a friend and a
champion of our efforts to improve the lives of thousands of folks
living in Kansas City, Missouri.
I am currently the Vice President/Chief Operating Officer of Swope
Community Builders, a position I have held for the past 13 years. Swope
Community Builders is one of the nation's 3,600 community based
development organizations represented by the National Congress for
Community Economic Development.
We are a nonprofit community development corporation with a $7.5
million annual budget. On December 31, 1991 our total assets were
approximately $60,000. On December 31, 2003 our total assets exceeded
$61.4 million. We have completed in excess of $120 million in
development projects--single and multi-family housing, as well as
commercial and institutional--over the past 10 years. Every dollar the
Federal Government invests in our work leverages another $7. We manage
more than $100 million dollars of investment. We have over $100 million
of new investments in our development pipeline.
In 1991, when I came to work at Swope Community Builders, many in
our was troubled with high poverty and unemployment rates, low housing
values coupled with many vacant and abandoned buildings. Many in our
community did not have adequate health care coverage or access to
retail shopping. Community residents were not engaged in planning
activities nor were they beneficiaries from higher economic growth.
As I stated earlier, Swope Community Builders has completed in
excess of $120 million in redevelopment projects during its 14 years of
existence. One of our most important projects, the H&R Block Technology
Center, was completed in December 1999. This project, a corporate
technology center built using cutting edge construction, cabling and
computer technology, relocated 150 employees earning an average of
$45,000 per year from suburban Kansas to Kansas City's urban core and
created 400 full time equivalent jobs with starting salaries of $15.00
per hour. The total annual payroll at the H&R Block technology center
exceeds $20 million. The building generates annual real estate taxes of
approximately $225,000 which, coupled with economic activity taxes,
generates enough income from a Tax Increment Finance District to debt
serve a $2 million tax exempt bond issue that has been used to spur
other job creating redevelopment projects. Across the country, the
computer needs of over 8,000 of H&R Block's franchisees are serviced by
this Center. This project did more than provide jobs to area residents;
it provided hope to the residents, spurred further development and
provided proof to other corporations and investors that urban Kansas
City locations are safe and can be the sites of sound investments.
The FirstGuard Office Building, a 72,000 square foot
technologically advanced office building completed in 2002, is home to
the FirstGuard HMO, Mazuma Credit Union, the Dalmark Corporation, the
Housing and Economic Development Financial Corporation and Swope
Community Builders. This $14 million facility is geared toward
companies with a need for fast computer links, advanced telephone
systems and video capabilities and a trained labor force. This building
is home to over 300 employees.
Swope Community Builders is in the development phase of the New
Village at Technology Center, a 480,000 square foot office/warehouse
project, accompanied by 50,000 square feet in companion retail/service
space and 175 units of work force and market rate housing. The New
Village at Technology Center will be designed to attract office/
warehouse tenants whose businesses are based upon the uses of new
technologies, who have similar needs as the tenants in the H&R Block
Technology Center and the FirstGuard Office Building and who need easy
access to rail and surface transportation. This center will employ over
1,200 people at average wages of $19.50 per hour which translates into
an annual payroll of $48.6 million. It is expected that a large
percentage of the jobs created will be filled by residents from Kansas
City's 3d Council District, statistically its most economically
distressed location, located due east of the Central Industrial
District. This project will have a lasting effect on at least 1,200
families while providing another example to the investment community
that community development corporations are excellent partners who
understand how to make deals work in urban core America.
The revitalization of our community and the H&R Block project would
not have been possible without substantial federally funded and
supported investments. Again I want to recognize Senator Bond's efforts
in securing millions of Federal dollars for these initiatives. We
regularly make great use of HUD funds through HOME and the Community
Development Block Grant, Health and Human Services through the Office
of Community Services, the Department of Justice through COPS and the
Neighborhood Initiative and Economic Development Initiative programs.
We have also utilized local governmental funding techniques such as Tax
Increment Financing, Special Taxing Districts, Property Tax Abatement
(home ownership projects) and the city of Kansas City's Capital
Improvements programs. All these funding mechanisms, coupled with
private capital from conventional loans and equity investments, are
crucial to bringing more technology based projects and investments to
urban core locations where sites are available and easily trained labor
forces are available.
One Agency missing from that list is the Economic Development
Administration. Despite our best efforts, Swope Community Builders has
never received any funding from the Economic Development
Administration. Indeed, none of the 14 Community Development
Corporations in Kansas City has received substantial funding from the
Economic Development Administration in the past 16 years.
The experience in Kansas City is not an isolated case. Our
membership association, the National Congress for Community Economic
Development (NCCED), surveyed some of the leading Community Development
Corporations in the Nation in 2002 to learn of their experiences.
Outside of the Western region, which includes California and
Washington, no Community Development Corporation could report access to
Economic Development Administration investments.
To his credit, Assistant Secretary David Sampson has taken this
lack of access of community based organizations to Economic Development
Administration seriously. Dr. Sampson told NCCED members at our Policy
Summit in March that, ``I have a great appreciation of what you do in
local communities every single day.'' Dr. Sampson has a personal
commitment to community based organizations, including those that are
faith-based because he knows Community Development Corporation's create
conditions so our communities have a growing standard of living. Over
the past 3 years, Dr. Sampson has made community based organizations
and faith-based organizations a funding priority of the Economic
Development Administration. Dr. Sampson clearly stated that the
Economic Development Administration should not discriminate against
faith based or community groups in funding decisions. Economic
Development Administration headquarters is looking at regional offices
to see if they are working with new groups, expanding the deal flow,
and expanding the group of partner agencies. ``We do not want to work
with the same groups all the time'', he said. ``It is our goal that no
geographic sector or community is left behind in the economy
geographically or demographically'', he added. The Economic Development
Administration has added a community based partnership category to its
annual Awards for Excellence.
However, the intention has not translated into reality due to a
combination of inadequate appropriations for the Economic Development
Administration and an institutional culture that is closed to
community-based nonprofits like mine.
In the previous Economic Development Administration
reauthorization, Congress expressly made community based organizations
an eligible group for Economic Development Administration investments
and relaxed the requirements that any project have approval from the
development department of the participating jurisdiction.
Making nonprofits eligible for poverty alleviation resources is a
typical Federal strategy including programs like the Temporary
Assistance to Needy Families, Workforce Investment Act, and the
Economic Development Administration. However, in most of these
programs, eligibility does not translate into partnerships that build
on the abilities of nonprofits.
While I support the reauthorization of the Economic Development
Administration, I hope that the Agency and Congress will more
aggressively seek opportunities to enable nonprofit community based
organizations to better utilize Economic Development Administration
funds. Some opportunities include providing a set-aside investment pool
specifically for community development corporations that is available
through competitive applications to headquarters.
Swope Community Builders is preparing a pre application as
described in the Catalog of Federal Domestic Assistance, Grants for
Public Works and Economic Development Facilities, for $2.5 million to
assist in the predevelopment stage of the New Village at Technology
Center. One of the selection criteria states that the project must
``involve innovative partnerships and private investment leveraging''.
Swope Community Builders' projects are always based upon partnerships
with local, state and Federal partners, local and regional banks,
national intermediaries, philanthropic foundations and, most
importantly, local residents. While I am sure this criterion is
utilized, I would like to see some type of application scoring system
that would give higher priority to community development corporations
that leveraged relationships as well dollars. Economic Development
Administration assistance will, allied with the type of financing tools
that we have utilized on our completed projects, be crucial to the
speedy and efficient development of this most important project.
It is my personal belief that the future of urban core
neighborhoods is closely tied to job creation and economic development
that are tied directly to new and emerging technologies from
biomedicine to information dissemination and management to light
industry and manufacturing. The Economic Development Administration can
and must act as a catalyst, providing dollars that can be leveraged
seven (7) times by those who have the commitment to urban core
communities and the experience to produce job creating development
projects.
Thank you for the opportunity to testify on how community
development corporations are building strong vibrant communities with
the Federal Government as our investment ally. We look forward to being
able to add the Economic Development Administration's programs to our
arsenal as we continue to attack the problems that plague some parts of
our nation's urban cores. I personally look forward to a continued
working relationship with Senator Bond, a true champion of urban
revitalization.
__________
Statement of Phillip A. Singerman, Ph.D., Executive Director, Maryland
Technology Development Corporation, on behalf of the International
Economic Development Council
Mr. Chairman, distinguished members of the Committee, I am truly
honored to be invited to testify before you on the Reauthorization of
the Public Works and Economic Development Act of 1965. My name is
Phillip Singerman, Executive Director of the Maryland Technology
Development Corporation (TEDCO) and member of the International
Economic Development Council Board of Directors. I believe I have a
special perspective to bring to your deliberations: from 1995 to 1999 I
served as Assistant Secretary of Commerce for Economic Development, and
in that capacity was responsible for the Economic Development
Administration (EDA) when Congress reauthorized EDA in 1998--the first
time the Agency had been reauthorized in nearly 20 years. That was a
milestone achievement of the Congress, carried out in a bi-partisan
fashion, and I want to congratulate you for that visionary action.
I also want to commend Assistant Secretary David Sampson for his
leadership of the Agency and for helping push for an innovative bill to
reauthorize EDA for the next 5 years. He and members of his staff have
made a special effort to reach out my colleagues in the local economic
development community and myself. I want to thank him for these
personal and professional courtesies.
Since 1999 I have directed a public instrumentality in the State of
Maryland, established by the General Assembly to create and sustain
businesses through the development, transfer, and deployment of
innovative technology. In Maryland EDA has played a crucial role in
distressed urban areas such as Baltimore, rural communities on the
Eastern Shore of the Chesapeake Bay, and depressed Appalachian counties
of Western Maryland. EDA has taken a leadership role in helping
underserved areas connect to high-speed internet service, and in aiding
small companies through the development and support of business
incubation.
I am also here today as a representative of the International
Economic Development Council. IEDC is the leading association serving
economic development professionals and those in allied fields. IEDC's
more than 4,000 members are committed to building local and regional
economies worldwide. The key to IEDC's reputation and steady growth is
its access to a large and diverse pool of professionals and the quality
of the council's staff. For more than 30 years, IEDC and its
predecessor organizations have been producing quality services that
help find solutions to the complex and varied issues of economic
development. For the past year, IEDC has been working with EDA and
Congress to help contribute to the reauthorization of the EDA On behalf
of the thousands of economic development professionals that I represent
today, I thank you for this opportunity to voice our support for this
critical Agency.
I have carefully reviewed both the House passed legislation (H.R.
2535) and the Senate introduced Administration bill (S 1134), and have
attached a set of policy recommendations provided by IEDC. In my
testimony I want to highlight the following points:
<bullet> The importance of prompt passage of EDA reauthorization
<bullet> The importance of providing adequate funding authorization
levels
<bullet> The importance of allowing more efficient management of
EDA's Revolving Loan Fund Projects, specifically, removing Federal
restrictions on these projects after 20 years.
EDA: HELPING TO ENSURE THE FUTURE OF AMERICAN MANUFACTURING
EDA is generally viewed in Washington as an anti-poverty program,
alleviating low income, under-employment, and unemployment. Having
worked and studied this general issue for my entire professional
career--nearly 30 years--I have come to the conclusion that EDA is
perhaps more importantly a capacity building program, which increases
the productivity of the Nation. It does this by making investments that
leverage under-utilized economic resources--human capital, financial
capital, and real estate--that are reflected in unemployment,
inadequate business financing, and low valued land. It does this by
redeveloping physical infrastructure that is threatened by abandonment
due to such things as military base closures and changes in
international flows of capital. And it does this by broadening the
participation of minorities and women in the work force.
Over the past 3 years, American manufacturing jobs have
dramatically declined. The cause of this decline can be traced to
decisions made by domestic manufacturers to relocate plants and
factories in foreign countries offering a more lenient production
environment and lower wage work force. In light of these global
changes, the Administration is actively seeking ways to address the
critical loss of U.S. manufacturing jobs. Some of this attention is
focused appropriately on job training, and some will seek to support
emerging industries, including high-tech manufacturing. IEDC supports
and encourages all of these steps, and believes the EDA, as the lead
Federal Agency working with economic development districts and related
state and local government agencies, should play a major role in these
efforts to address the decline in the American manufacturing industry.
The EDA provides a number of demonstrated tools that can be used to
secure manufacturing employment by creating new opportunities for job
creation, technology advancement, skills and job training and
infrastructure development. The EDA works directly in the communities
that are most devastated by the loss of major manufacturers. The EDA's
Economic Adjustment grants provide the much-needed support for
communities dealing with the ``sudden and severe'' distress caused by
layoffs, downsizing and plant closings. This spring the Congress will
be reviewing the Administration's budgetary requests for fiscal year
2005, and this summer, agencies will be submitting their requests to
the Administration for fiscal year 2006 funding.
I can assure this committee that in the normal give and take of the
budgetary process, an Agency that is not reauthorized will suffer in
the process; for those who care about the ability of EDA to provide
critically needed support to our most distressed communities and
populations, delay is not an option.
Quick reauthorization of EDA will also be important for communities
that suffer the closure--or significant downsizing--of a local military
base during the 2005 Base Realignment and Closure (BRAC) round. During
the previous four base closure rounds, the Agency provided almost $650
million in grants to 106 communities for economic planning and
redevelopment assistance. Up to approximately 100 installations could
be closed through the 2005 round. EDA grants help communities achieve
productive civilian reuse of closed military bases and rapid economic
development through technical and financial assistance.
Although I believe there are one or two areas in which the House
bill could be improved, I respectfully urge the committee to promptly
consider passage of legislation that reauthorizes the EDA.
PROVIDING THE APPROPRIATE AUTHORIZATION LEVELS (SECTION 701)
The House passed legislation proposes an authorization level of
$2.25 billion for EDA programs for 5 years: $400 million for fiscal
year 2004, and an additional $25 million each year from fiscal year
2005-fiscal year 2008. The Administration requested $321 million for
fiscal year 2005 and such sums as necessary in the remaining years. The
House bill provides authorization levels for the EDA that will allow
Congress to respond to unanticipated economic difficulties.
The House passed version is a significant improvement over the
current level of the budget in a number of major ways.
First, the legislation provides Congress with the authorization
flexibility it needs to address unanticipated economic difficulties,
such as those occasioned by international trade competition and
homeland security. This is comparable to the flexibility previously
utilized by the Congress to respond to natural disasters and defense
conversion/base closures.
During the latter part of my tenure we were faced with economic
crises in the steel and textile industry, yet the lack of sufficient
authorization levels prevented an appropriate addition to EDA's funding
to address these severe and sudden problems. The result was that
funding to address these issues was taken away from other communities
that were suffering long-term economic deterioration, creating a
conflict among equally needy regions. This new language does not
eliminate the ultimate responsibility of Congress to make judgments
about budget priorities, but it does remove an artificial constraint to
your appropriate level of flexibility.
Second, IEDC and those in the economic development profession who
rely on EDA funding, are concerned about the steady decline in funding
for EDA programs, and particularly the disproportionate cuts imposed by
the fiscal year 2004 Omnibus Appropriations Act. The fiscal year 2004
appropriation of $288 million is 15 percent below the authorized level
and 30 percent below the House recommended authorization level of $400
million. Based on EDA performance data, a $43 million investment could
result in an additional $129-430 million in private sector investment
and the potential for 22,000 jobs. The House approved authorization
levels give the economic development community options for addressing
future funding needs for projects and initiatives the spur investment
and help create jobs.
REVOLVING LOAN FUND (RLF) PROGRAM MODIFICATIONS (SECTION 207)
EDA's revolving loan fund program (RLF) is a very important
component of a local communities' overall economic development
activity. In 2002 the Center for Urban Policy Research, Rutgers
University, released three reports totaling nearly 950 pages on EDA's
RLF program (Burchell, et al.) The study's authors concluded that (1)
an RLF is one of the most effective tools available to economic
development agencies, (2) RLF loans enable businesses to prosper that
would not have prospered under convention lending guidelines, and (3)
the RLF program was supported by effective regional economic planning
and good program planning. I recall that during my tenure the RLF
program was particularly helpful in communities affected by base
closure and natural disasters; by contrast emergency loan programs
administered by the SBA are limited in the time during which they are
available and not part of an overall local recovery strategy.
The House passed legislation does modify several regulations
concerning the revolving loan fund (RLF) program of the EDA. The bill
allows for more flexibility and options in delivering this important
program. The House bill specifically gives EDA broad authority to
issues new rules and regulations to ensure the ``proper operation and
financial integrity'' of Revolving Loan Funds (RLF). The bill also adds
new language allowing EDA to permit grantees that are operating more
than one RLF to consolidate funds at the request of the local grantee.
EDA is also given the authority to transfer assets of RLF to 3d party
for purpose of liquidation and adds new provision allowing EDA to
authorize RLF operators to securitize or sell loans to secondary
market.
One major provision was, however, left out of the House passed
version that was included in the Administration's proposed legislation.
As proposed in the Administrations legislation and included in S. 1134,
modifications of section 209 to release the Federal interest in a
revolving loan fund grant is a long overdue correction to the law,
which currently creates an unnecessary--and frankly--unmanageable
administrative burden on EDA and local communities. This will remove a
significant reporting requirement from local communities and monitoring
responsibility from EDA.
This is really a very modest step and other agencies--such as
USDA--``defederalize'' local loan programs once the funds have been
fully recycled (loaned out and then repaid). However, EDA's revolving
loan fund program is structured as a grant to a local community, and
therefore a more stringent standard than in a loan program is
appropriate. The requirement of 20 years of successful performance
ensures that only well run programs will be able to qualify for this
step, and the requirement of a reimbursement to the Federal treasury--
not to EDA--ensures that the Agency will have no financial incentive to
defederalize non-qualifying programs. Please understand that this
process can only be undertaken pursuant to formal regulations
promulgated by the Secretary of Commerce, and that the Department's
Inspector General will undoubtedly also be monitoring this process
carefully.
One final comment: we tried to defederalize RLFs 6 years ago but
did not pursue it in the face of opposition by EDA's friends in the
Congress. The argument put forward at that time was that through
defederalization, Davis-Bacon protection would be weakened. At that
time we did not have the data necessary to analyze that issue: however,
the Burchell report on RLFs previously cited clearly demonstrates that
these loans are not used in construction or public works but for
working capital to small businesses for startup, retention or expansion
purposes, and thus Davis-Bacon does not apply.
CONCLUSION: ENDURING IMPORTANCE OF EDA
In these times of economic recovery, it is imperative that the EDA
continue its stated mission to ``help our partners across the Nation
(states, regions and communities) create wealth and minimize poverty by
promoting a favorable business environment to attract private capital
investment and higher-skill/higher-wage jobs through world-class
capacity building, planning, infrastructure, research grants and other
strategic initiatives.'' By quickly and decisively acting on this
important reauthorization, the Congress can send a lucid and convincing
message that EDA and its programs, that help create jobs and stabilize
distressed economies, are a high priority of the Federal Government.
______
Respones by Phillip Singerman to Additional Questions from
Senator Jeffords
Question 1. You have always been a supporter of the comprehensive
economic development strategy; do you think that this process is still
relevant in this technology lead new economy environment?
Response. Over the past 8 years, Rutgers University Center for
Urban Policy Research conducted a series of comprehensive studies of
EDA's programs, and found that local planning was critical in the
success of EDA's programs, such as public works. My personal experience
as EDA Administrator is that when communities had not engaged in a
comprehensive planning process, but received funding (e.g., post flood
disaster, base closures), the programs were not as well managed. EDA's
planning programs are terribly under-funded - communities are receiving
the same level of funding that they received nearly forty years ago.
EDA should devote a minimum of $50 million annually for planning,
technical assistance, and research, and any community- and State - that
wishes to engaged in a comprehensive planning process, should receive
funding (although wealthier communities would be required to provide a
higher cost share).
Question 2. The House EDA reauthorization bill creates a new five
percent planning performance award, but only for projects located in
economic development districts. What is your opinion of this award and
the overall incentive structure put forward in the House bill?
Response. Communities should be encouraged to work with their local
EDA-designated planning region; in this way local planning will be
taken seriously. Accordingly, I support all incentives which encourage
closer relationships and greater attention to comprehensive, inclusive
planning.
______
Reauthorization of the Economic Development Administration Policy
Recommendations
Provided by the International Economic Development Council (IEDC)
EDA programs direct vital resources for infrastructure development,
local capacity building, and business development to alleviate
conditions of unemployment and underemployment in economically
distressed areas and regions across the U.S. The Federal law to
authorize programs and funding for the Economic Development
Administration (EDA), The Economic Development Administration Reform
Act of 1998 (P.L. 105-393), expired on September 31, 2003. Renewal of
our national commitment to the economic development priorities
supported by this small, but highly effective Federal agency should be
made a legislative priority for Congress in 2004.
The House of Representatives reauthorization proposal, H.R. 2535,
was approved on October 21, 2003, laying out a 5-year plan to continue
EDA's mission with some modifications designed to improve performance
and increase flexibility and funding levels. The Senate introduced S.
1134 reflects the Administration's proposal. No additional hearings or
legislation action occurred in 2003. Pending reauthorization, EDA
continues to operate under the authority of the 1998 Act.
[``This legislation was developed through an intense process of
hearings and markups. It was an open process that allowed for the input
of all Members and groups with an interest in the legislation. This
process has resulted in legislation that has broad bipartisan support,
the support of the administration, and the support of such important
partners as the National Association of Development Organizations,
International Economic Development Council, National League of Cities,
National Association of Counties, and the United States Conference of
Mayors.'' Stated Chairman LaTourette in his opening House floor remarks
for EDA reauthorization.]
In these times of economic recovery, it is imperative that the EDA
continue its stated mission to ``help our partners across the Nation
(states, regions and communities) create wealth and minimize poverty by
promoting a favorable business environment to attract private capital
investment and higher-skill/higher-wage jobs through world-class
capacity building, planning, infrastructure, research grants and other
strategic initiatives.'' By quickly and decisively acting on this
important reauthorization, the Congress can send a lucid and convincing
message that EDA and its' programs, that help create jobs and stabilize
distressed economies, are a high priority of the Federal Government.
IEDC, as the nations' largest organization representing economic
development professionals, urges the Congress to complete the EDA
reauthorization this year. IEDC supports passage of a comprehensive
bill that will maximize funding, performance and accountability in EDA
programs. This action will send a strong message to economic
development agencies and their private sector partners that Congress is
committed to the EDA mission of providing vital seed money to high
performing regional and local economic development projects.
The IEDC has prepared some policy guidelines for consideration in
the formulation of an EDA reauthorization bill in the Senate. IEDC is
committed to working with the Congressional leadership to pass
legislation widely supported by industry and economic development
practitioners committed to national priorities of job creation and
economic growth.
EDA IMPORTANCE
<bullet> The EDA is the only agency within the Federal Government
that works solely to promote private sector job growth with programs
and activities that directly relate to economic development.
<bullet> EDA maintains effective interagency partnerships with
other Federal agencies, including the Departments of Defense, Labor,
Energy, Agriculture, HUD, the EPA, ARC and FEMA/DHS, to promote
economic development in distressed areas.
<bullet> EDA has a strong regional operation working side-by-side
with state and local economic development agencies to plan, prioritize
and implement economic development projects emphasizing the creation of
jobs and sustainable, comprehensive economic growth.
<bullet> EDA's record of performance under the Government
Performance Review process is one of best among Federal programs and
agencies. EDA was also heralded recently in a study released by Rutgers
University to evaluate the public works program at EDA. Rutgers rated
EDA's work exemplary. They found a 100 percent return on investment for
all projects (public and private) supported by EDA funding. For every
$1 million of Federal money spent, another $1 million was leveraged in
Federal, state, or local investment dollars. The study found, on
average, this level of investment also produced 325 direct permanent
jobs in the impacted community. EDA reporting shows an even more
optimistic outcome. Looking at data collected on investments since
1965, EDA shows public works investments have generated $10 million in
private sector dollars and $10 million in the local tax base for every
$1 million spent by EDA.
<bullet> Quick reauthorization of EDA will also be important for
communities that suffer the closure--or significant downsizing--of a
local military base during the 2005 Base Realignment and Closure (BRAC)
round. During the previous four base closure rounds, the agency
provided almost $650 million in grants to 106 communities for economic
planning and redevelopment assistance. Up to approximately 100
installations could be closed through the 2005 round. EDA grants help
communities achieve productive civilian reuse of closed military bases
and rapid economic development through technical and financial
assistance.
The mission of EDA is to address severe and persistent conditions
of unemployment and underemployment in severely distressed communities,
many struggling to recover from the loss of a major employer or other
economic dislocation. Through infrastructure grants, strategic planning
assistance, business development capital and technical assistance, EDA
provides a level of investment that acts as a catalyst for economic
development that would typically not progress if not for the EDA funds
to close financing gaps and spur capital investment. Moreover, EDA
requirements for state and regional collaboration in planning and
implementation of economic development strategies works to build
capacity and partnerships that are sustainable and innovative.
<bullet> IEDC urges the Senate to draft EDA reauthorization
legislation that builds upon the existing successes and structure of
the Administration,
<bullet> Increases and commits to higher funding levels and
performance standards, and
<bullet> Encourages partnerships at the local level across numerous
stakeholders and service providers.
eda: helping to ensure the future of american manufacturing
EDA is also an important capacity building program, which increases
the productivity of the nation. It does this by making investments that
leverage under-utilized economic resources--human capital, financial
capital, and real estate--that are reflected in unemployment,
inadequate business financing, and low valued land. It does this by
redeveloping physical infrastructure that is threatened by abandonment
due to such things as military base closures and changes in
international flows of capital. And it does this by broadening the
participation of minorities and women in the work force.
Over the past 3 years, American manufacturing jobs have
dramatically declined. The cause of this decline can be traced to
decisions made by domestic manufacturers to relocate plants and
factories in foreign countries offering a more lenient production
environment and lower wage work force. In light of these global
changes, the Administration is actively seeking ways to address the
critical loss of U.S. manufacturing jobs. Some of this attention is
focused appropriately on job training, and some will seek to support
emerging industries, including high-tech manufacturing. IEDC supports
and encourages all of these steps, and believes the EDA, as the lead
Federal agency working with economic development districts and related
state and local government agencies, should play a major role in these
efforts to address the decline in the American manufacturing industry.
The EDA provides a number of demonstrated tools that can be used to
secure manufacturing employment by creating new opportunities for job
creation, technology advancement, skills and job training and
infrastructure development. The EDA works directly in the communities
that are most devastated by the loss of major manufacturers. The EDA's
Economic Adjustment grants provide the much-needed support for
communities dealing with the ``sudden and severe'' distress caused by
layoffs, downsizing and plant closings. We urge the Senate to support
the need to focus on manufacturing jobs, and to consider a new program
or title in the EDA reauthorization that will invest new dollars in
this seriously impacted sector of the economy.
This spring the Congress will be reviewing the Administration's
budgetary requests for fiscal year 2005, and this summer, agencies will
be submitting their requests to the Administration for fiscal year 2006
funding. During the normal give and take of the budgetary process, an
agency that is not reauthorized will suffer in the process; for those
who care about the ability of EDA to provide critically needed support
to our most distressed communities and populations, delay is not an
option.
LEGISLATIVE OVERVIEW & POLICY STATEMENTS
As a general statement of support, the IEDC membership endorses the
position taken by the House legislation, H.R. 2535, almost entirely.
IEDC's support is consistent with our industry and association
colleagues, including The National Association of Development
Organizations, the National League of Cities, the U.S. Conference of
Mayors and the National Association of Counties. The following summary
of key issues for the reauthorization highlights provisions in H.R.
2535 supported by IEDC members and offers some recommendations for
additional provisions or modifications for consideration in a final
package.
Support H.R. 2535:
New Performance Incentive Award.--Support incentive award under the
Public Works and Economic Adjustment Program(s) of up to 10 percent of
the original grant amount. The award could be used to fund up to 100
percent of any other EDA-eligible project or activity, or to meet the
non-Federal match requirement for another project funded by EDA or
another Federal agency. The flexibility of use on this award sends a
strong signal of the high premium EDA will place on high standards of
performance. The award will allow EDA and local grantees to leverage
even greater success from innovative challenges in struggling
communities to invest in new job creation and economic growth projects.
The award program will provide a strong incentive for grantees to
complete projects on or ahead of schedule.
New District Bonus Award.--Support replacing the existing 10
percent district bonus award with a tiered system that includes the
original 10 percent bonus award, as well as the potential for an
additional 5 percent planning bonus award to a project grantee who are
part of an economic development district. The bonus will be available
only to grantees who are active participants in an economic development
district and for projects that are in accordance with the comprehensive
economic development strategy of the district. The bonus award provides
added incentive for cooperation and comprehensiveness in EDA project
funding.
Ensuring Planning Coordination.--Support requirement that state and
local governments and economic development districts continue to
develop EDA-funded state plans in a cooperative manner, ``to the
maximum extent practicable.'' Currently, states are required to certify
that the state plan is consistent with local governments and economic
development district plans. H.R. 2535 amends the law to require states,
before receiving EDA planning funds, to outline the extent to which
they will consider local and district plans. [The Administration
proposes to eliminate the requirement that states work with local
districts. S. 1134 would only require states to take regional economic
development strategies ``into consideration'' when creating new plans.]
It is critical to the success of economic development efforts that all
affected parties remain involved in the process of attracting new
investment and spurring job growth.
Matching Requirements.--Support replacing the current 75-25
Federal-local matching requirement with a flexible system that allows
EDA to adjust the Federal share of infrastructure and economic
development projects based on the specific circumstances of the
grantee. As a general rule, the Federal share is capped at 80 percent,
with exceptions made for Indian tribes, local governments, planning
districts and other groups who have exhausted their financial capacity.
The Federal share for planning grants is set at 65 percent with the
potential for an 80-20 cost split. The Administration request is
reflected in the House approved language. EDA funding has contributed
to thousands of successful projects and is often the catalyst for
moving a project forward. EDA should be allowed to utilize its
extensive experience in project planning and investment to adjust the
Federal share for grant projects to address special needs.
Cost Underrun Provisions.--Support changes that allow local
grantees to use excess funds from EDA-funded projects, known as cost
underruns, to increase the Federal share of the project costs. This
would, in affect, lower the local match of the project, as well as
provide more flexibility at the local level. EDA would also be allowed
to recapture and reprogram excess funds where the grantee is not
undertaking a new project and cannot otherwise use the funds. Current
law requires excess funds to be returned to the general fund. Project
grantees should be rewarded for completing projects under budget and
should be given the flexibility to reduce local matching funds, and/or
reinvest excess funds from cost underruns. This provides more options
and increased levels of funding for EDA supported activities.
Special Impact Areas.--The House bill allows the EDA to waive the
CEDS requirement for certain project grantees. This provision is
intended for remote areas and requires that the EDA provide
congressional committees with a justification for any waiver. This
provision is a modified version of the Administration's proposal for
special impact areas.
Authorization of Appropriations.--Current Law authorized $1.71
billion over 5 years: $335 million for FY2001-2003, $368 million in
FY2000 and $398 million in FY99. H.R. 2535, as approved in the House,
authorizes $2.25 billion for EDA programs for 5 years: $400 million for
FY2004, and an additional $25 million each year for FY2005-FY2008. The
Administration requested $321 million for FY2005 and such sums as
necessary in the remaining years.
IEDC is concerned about the steady decline in funding for EDA
programs, and particularly the disproportionate cuts imposed by the
FY2004 Omnibus Appropriations Act. The FY2004 appropriation of $288
million is 15 percent below the authorized level and 30 percent below
the House recommended authorization level of $400 million. Based on EDA
performance data, a $43 million investment could result in an
additional $129--430 million in private sector investment and the
potential for 22,000 jobs.
IEDC strongly urges Congress to fund EDA programs in the budget and
appropriations process at fully authorized levels, especially the
public works program and planning grants. EDA has one of highest
performance ratings of any Federal agency program. The Public Works
program provides valuable infrastructure development leverage for
encouraging new investment and business growth. Economic planning
allows communities to weather short-term economic challenges and
implement long-term economic recovery. This is particularly important
during times of recession, industry decline and worker displacement
events.
POLICY AND PROGRAM RECOMMENDATIONS
In general, IEDC supports the House passed version for EDA
reauthorization. The following are ideas that would help strengthen and
improve upon the H.R. 2535. These recommendations are based on the
needs that IEDC has recognized in the field of economic development.
These recommendations would dramatically impact local economic
development efforts and help to improve the services, programs and
benefits furnished by the Economic Development Administration.
Recommendation #1: Authorize EDA to implement new regulations to
DEFEDERALIZE CERTAIN REVOLVING LOAN FUNDS.
H.R. 2535 is consistent with the Administration proposal by
expanding EDA authority to revise regulations for the Revolving Loan
Fund (RLF) program, as appropriate. H.R. 2535 specifically modifies RLF
provisions, including a clarification that only local grantees may
request an amendment or consolidation of RLF agreements.
The RLF Program could be dramatically improved by:
1. Allowing EDA to recapitalize and expand the lending
capacity of existing RLFs that have established a successful
track record and demonstrated demand.
2. Implementing a new technical assistance program to
complement the RLF program that will better safeguard
investments made by the RLF, including authority to allow RLF
grant funds to be used for professional development for RLF
managers.
3. Allow EDA to deFederalize RLF moneys once they have been
loaned out and repaid one time. This is consistent with other
Federal loan programs, will reduce paperwork and regulatory
burden while continuing to require local accountability.
The EDA RLF program is one of the most successful and powerful
economic development tools for addressing the credit gaps that exist in
many distressed communities, particularly in underserved rural areas.
By using limited public funds to leverage private capital, locally
managed RLFs have provided business capital to thousands of new and
existing companies that have difficulty securing conventional
financing.
Capitalized with an EDA grant, RLFs are managed by public and
private nonprofit organizations (including economic development
districts) designed to further local economic development goals by
lending their initial capital and then reloaning funds as payments are
made on the initial loans. Loans are typically used for fixed assets or
working capital needs. Organizations are also required to demonstrate
how the RLF fits their local needs, as defined in a comprehensive
economic development strategy.
The participation of RLF funds in a business deal usually
encourages once-reluctant banks to also lend, since loan funds normally
agree to let banks recoup their losses first from the business'
collateral in the event of default. By providing such gap financing,
loan funds have been instrumental in the growth of companies that
otherwise would not have received funding.
Recommendation #2: Broaden the scope and authority of current
Brownfield funding legislation by amending the 2003 Small
Business Liability Relief and Brownfield Revitalization Act.
H.R. 2535 provides language that specifically allows nonprofit
organizations to be eligible for brownfield redevelopment projects.
This additional provision will expand both the EDA and nonprofit
sector's ability to redevelop these sites. IEDC supports these
provisions and urges the Senate to include such language in their
version of EDA reauthorization.
However, other barriers need to be removed which prevent
communities from tapping into Federal resources for brownfield
redevelopment. IEDC recommends that the Senate include language in the
EDA reauthorization legislation that amends the 2003 Small Business
Liability Relief and Brownfield Revitalization Act.
The amendment would remove the prohibition against the use of EPA
grant funds for clean up and redevelopment of sites acquired prior to
the law's January 11, 2002 enactment. This amendment should also
include language to eliminate the prohibition on using EPA grant funds
for reasonable administrative costs to carry out brownfield projects.
These prohibitions limit the range and scope of Federal brownfield
redevelopment efforts and changing these rules would qualify numerous
sites across the country for Federal funding to spur redevelopment and
revitalization. Ultimately leading to increased investment in local
project and the creation of new jobs.
While this technical change does not apply directly to the EDA
reauthorization measure, it is an important technical problem facing
brownfield redevelopment. EDA is committed to the practice of
redeveloping brownfields and these technical changes would open up the
range of projects that may apply for funding from both the EPA and EDA.
Recommendation #3: Stipulate that the newly created Brightfields
Program under H.R. 2535 is subject to specific appropriations
over and above current funding levels for existing EDA
programs.
IEDC in general does not support special categories of funding such
as this new program because they tend to reduce the overall portion
available for all EDA activities rather than adding to the total
appropriations level. However, in case of the newly proposed
Brightfield Program, IEDC feels that this problem can be remedied by
authorizing a new program under the EDA that is funded at up to $5
million annually from fiscal year 2004 through 2008, subject to
appropriations, and under the additional stipulation that no funds may
be transferred from the EDA program budget allocation for this new
program unless Congress has appropriated the full amount authorized for
EDA programs under the Act. If appropriated at fully authorized levels,
EDA may set aside up to $5 million into the budget for these purposes.
If less than fully authorized levels are appropriated, brightfields
projects can compete for funding under existing EDA program authority.
Recommendation #4: Strengthen language to reinforce the partnership
between business and industry sectors and Workforce Development
planning and implementation.
Under local and economic development district plans. The
Administration had provided language that supports the coordination of
economic development plans with the Department of Labor's work force
investment plans. The House bill reinforces that plans developed with
EDA funding need to be ``consistent and coordinated with any existing
comprehensive economic development strategy for the area.''
Workforce development is becoming a critical factor in economic
development considerations. The U.S. Department of Labor has
appropriately concluded that ``businesses in high-growth industries
face increased difficulty in finding workers with the skills they need
as a result of globalization, the aging of America's work force, and
the fact that technology and innovation are continuously changing the
nature of work. As a result, job training community colleges will be
increasingly critical providers for workers needing to retool, refine,
and broaden their skills.'' IEDC supports the goal of DOL that
partnerships among industry and the public work force system, including
community colleges and universities, will be a critical economic
development tool in every labor market.
IEDC supports the inclusion of work force development activities as
a factor in developing plans and urges the Senate to support strong
language that directly links work force and economic development
efforts, and seeks a formal partnership between EDA and DOL in pursuing
these objectives.
ABOUT IEDC
The International Economic Development Council (IEDC) is the
leading association serving economic development professionals and
those in allied fields. IEDC's more than 4,000 members are committed to
building local and regional economies worldwide. The key to IEDC's
reputation and steady growth is its access to a large and diverse pool
of professionals and the quality of the council's staff. For more than
30 years, IEDC and its predecessor organizations have been producing
quality services that help find solutions to the complex and varied
issues of economic development.
To support these endeavors, IEDC cultivates an ever-increasing
wealth of resources that includes:
<bullet> An active Advisory Services & Research department that
fulfills private and government contracts,
<bullet> A history of designing successful conferences and events
for membership and Federal agencies such as Economic Development
Administration,
<bullet> An extensive in-house library and an information
clearinghouse that incorporates member and staff expertise,
<bullet> Leading-edge case-study-oriented publications,
<bullet> Timely and expert legislative tracking services, and
<bullet> Management, design and operation of industry's leading
professional development program.
IEDC is the one source, one voice and one force in economic
development.
IEDC is pleased to offer expertise and assistance to the U.S.
Senate Environment and Public Works Committee over the coming months in
designing legislation that reauthorizes the Economic Development
Administration. Contact Toby Rittner, Director of Legislative Affairs;
at 202-942-9489 or via email at trittner@iedconline.org for more
information on how IEDC can be of assistance.
______
Statement of the National Association of Regional Councils\1\ and
National Association of Counties
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\1\ The National Association of Regional Councils is a public
interest group formed in 1965 by the National Association of Counties
and the National League of Cities to address the growing interest in
regional cooperation among local governments. The association became an
independent organization in 1967, serving the interests of all regional
councils (councils of government, planning commissions, development
districts, metropolitan planning organizations and rural transportation
planning organizations) throughout the United States in both
metropolitan and rural areas. Twenty of its 24 board members are
elected officials representing counties and cities. NACo and NLC still
appoint a representative each to the NARC board. NARC is active in
supporting regionalism and the utilization of the network of regional
councils across the United States to address issues involving
transportation, economic development, housing, work force development,
senior citizens programs and numerous environmental issues including
water quality and quantity and air quality.
With headquarters on Capitol Hill, NACo is the only national
organization that represents county governments. More than 2,000
counties, representing 85 percent of the nation's population, are
members of NACo. The association acts as a liaison with other levels of
government, works to improve public understanding of counties, serves
as a national advocate for counties and provides them with resources to
help them find innovative methods to meet the challenges they face.
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Chairman Inhofe, Ranking Member Jeffords, distinguished members of
the panel, the National Association of Regional Councils (NARC) and the
National Association of Counties (NACo) are pleased to present
testimony for the record regarding reauthorization of the Economic
Development Administration.
Since its inception in 1965, the Economic Development
Administration (EDA) has been a major factor in supporting economic
development efforts in distressed cities and counties throughout the
country. It is one of the few agencies that supports strategic planning
efforts that allow cities and counties to develop a road map for
economic recovery over a broad, multi jurisdictional area. Working
through their designated Economic Development Districts, local
communities have participated in Their own recovery plans through
development of a Certified Economic Development Strategy (CEDS). The
CEDS process is a bottoms-up approach to economic development.
This approach has helped thousands of distressed areas build
infrastructure that attracts business development.
EDA is an important component of local, regional economic
development. EDA's role is to address longer-term economic problems
that affect the national economy and cyclical national patterns of need
or distress, such as defense economic adjustment, post disaster
economic recovery, resource or industry based downturns (coal, plant
closures, timber, textiles, fisheries, etc.). EDA is equipped with a
strong portfolio of program tools that can be readily engaged to
accomplish their mission--planning and technical assistance, public
works, research and national technical assistance, trade adjustment
assistance, and economic adjustment.
EDA remains as the only program with a specifically established
national network solely focused on the economic revitalization of
localities and regions experiencing longer-term or unanticipated
distress. It is the only agency with a clear legislative mandate to
address national cyclical economic needs in America's communities.
NARC and NACo, along with several other organizations, were
actively involved with the Administration and the House Transportation
and Infrastructure Subcommittee on Economic Development, Public
Buildings and Emergency Management in working out agreements on the
House-passed version of EDA reauthorization, H.R. 2535.
We support the contents of that bill. A new and potentially
innovative provision will allow up to a 10 percent bonus to the grant
recipient that meets or exceeds all the objectives outlined in the
original grant proposal. However, the proposal is untried and gives
some concern about how requirements will be structured and how
management of provision will be accomplished.
For example, a grantee that is seeking funding to develop
infrastructure for a promised business or industry location can receive
the bonus provided all objectives as outlined in the original grant
proposal are met or exceeded. Objectives in a grant proposal are based
on what a company has said it will invest financially in the project,
and on how many jobs the company says it will create or retain. There
are instances in which a company has decided at the eleventh hour to
invest less money for a variety of reasons and therefore hire fewer
people. Local governments should not be held responsible for such
business decisions that can be based on a variety of reasons. We
believe there is a way to address this potential problem.
We urge the committee to allow up to 5 years for a grant recipient
to receive its bonus and to recognize the investment and growth
potential as outlined in its original application. Any time during the
5-years, a community that reaches its stated goals could receive its
bonus and use it as non-Federal share for another EDA grant or for an
economic-development related grant from any other Federal Agency.
PLANNING AS AN ECONOMIC DEVELOPMENT TOOL
The Economic Development Administration has always recognized the
value of regional planning. The CEDS is a document that is developed by
local elected officials, private citizens and business organizations as
a blueprint for economic growth. Planning funds, however, have been
static. Economic development districts are receiving the same $52,000
per year that they received 25 years ago. In today's economy, that
$52,000 has the purchasing power of about $13,000 or 75 percent less
than in 1970. Obviously this makes it extremely difficult for a
district to maintain the skilled work force needed to develop economic
strategies.
We urge the committee to support a substantial increase in planning
funds from the current $24 million that will allow districts to receive
additional planning funds and provide funding for new district that
have been unsuccessful in receiving EDA designation. For example,
several areas in Vermont are interested in securing designation as an
economic development district because of economic conditions. However,
the scarcity of planning funds has made this nearly impossible.
Another provision in the House legislation would allow flexibility
in the planning fund match requirements. There are years in which a
district and its local government members are restricted in their
abilities to meet the 50/50 match. We support provisions in the House
bill that would allow a 65 federal/35 local match, allowing districts
and their local government members the flexibility to add more to
planning funds when tey have such funding available and less during
times of local budget crunches.
NARC and NACo also supports an expanded timeframe for the CEDS. As
one small, rural Vermont region indicated, no other Federal program
that the region deals with requires review and update as frequently as
EDA. This is a particularly onerous burden on small and rural regional
organizations with limited staff and resources, particularly given the
current strain on planning funds.
Our organizations support an extended timeframe for reporting on
CEDS of at least 3 years and possibly as long as 5 years. This will
reduce paperwork, thereby relieving staff burden and the additional
costs of annual updates. We do not believe this expanded timeframe
would in any way impact the quality of information EDA receives. We are
aware that EDA has been experimenting with the expanded timeframe in at
least one of its regions.
STATE PLANNING
The House passed reauthorization of EDA allows state planning that
may or may not take into consideration locally and regionally developed
economic recovery strategies. The argument in support of this provision
is that it would be too expensive for states to evaluate these local
and regional plans and incorporate them into a state-wide strategy.
We believe that it is important for states to consider at least
regionally developed plans that have been signed off on by local
governments. This would greatly reduce the number of plans that must be
reviewed and it would provide locals with input into state-wide
planning. In Oklahoma, for example, 10 of the 12 regional councils are
designated economic development districts. A review of 10 regional
plans that have been adopted by local governments, citizens and the
business community should not constitute an onerous burden for states.
Currently, few states utilize EDA planning funds. The new provision
may well encourage more states to participate. Since planning funds are
already inadequate, adding state planning funds to the mix could reduce
the amount of funding that designated economic development districts
receive and could prevent the establishment of new districts. Our
organizations have no objections to state planning utilizing EDA money
as long as additional funding resources are available.
REVOLVING LOAN FUNDS
We support EDA's efforts to maintain proper operation and integrity
of revolving loan funds. However, we would urge EDA to address in any
new regulations the concerns of current revolving loan fund operators
regarding requirements on percentage of funds that must be loaned out
at all times and the maximum amount of a loan.
The idea of a revolving loan fund is to keep a high percentage ``on
the streets'' to benefit local business and industry owners. We support
this concept, but during economic slowdowns, loan fund operators have
difficulty finding new businesses that are a good financial risk or
existing businesses that are interested in expanding. New regulations
should consider the cyclical nature of economic development.
New regulations should also allow a higher percentage of a
revolving loan fund to be loaned out to a particularly good business
prospect. It is not necessarily the quantity of loans that should be
considered, but rather the quality and impact of loans that are made.
We support the provision in the House legislation that would allow the
Secretary to consolidate different revolving loan funds at the request
of the grantee.
CONCLUSION
The Economic Development Administration has proved itself as an
effective Federal program that addresses bottom-up economic development
strategies. It deserves the full support of Congress through
reauthorization and through an increase in authorized funding levels.
We feel it is imperative that EDA not be allowed to languish as an
unauthorized agency. Our organizations are prepared to work with
members of the committee to support legislation that can pass Congress
this year.
______
Union County Board of Commissioners,
La Grande, OR, February 20, 2004.
Senators Gordon Smith and Ron Wyden,
Representatives Greg Walden, David Wu, Peter DeFazio, Darlene Hooley
and Earl Blumenauer,
Washington, DC.
Oregon Congressional Delegation:
We are writing to express deep concern regarding the new 2004 rule
from the Economic Development regarding the 22:1 match for economic
projects. Union County enjoys a wonderful working relationship with our
federal partners regarding our economic efforts. As a very rural area,
we have had to work double time to recover our once prosperous region.
We consider Anne Berblinger, our EDA representative, a great ally, as
she has always been there as a champion in our efforts to steer our
economic ship away from the rocks. We see this new rule to be a
considerable barrier to our partnership. We find that increasingly we
no longer have the resources or capacity to be a player.
As the attached document will show, the residents of Union County
have seen a 20 percent drop in their comparative wages over the past
two decades. This dissolution of our economic base has been due, in
most part, to federal regulations impacting our once. thriving natural
resources industry.
To have the federal government be the architects of our collapse
and then impose rules to recovery that will virtually guarantee our
inability to participate seems another federal government blow to rural
America.
We ask your help in correcting this imbalance.
Sincerely,
John Lamoreau,
Board Chairman.
Colleen MacLeod,
Commissioner.
Steve McClure,
Commissioner.
______
State of Oregon, Employment Department, Labor Market Information
A BRIEF COMPARISON OF EARNINGS TRENDS SINCE 1979
As a general rule, rural areas of Oregon have consistently lagged
the statewide and national averages in earnings and income. While it
may be widely acknowledged that such a difference exists, perhaps the
most troubling aspect of rural Oregon's experience over the past 20-25
years is that this gap in earnings has widened significantly over time.
This brief analysis compares average annual earnings per job
between Union County, Oregon, and the United States, using Oregon
Employment Department and U.S. Bureau of Labor Statistics data.
As of 1979, average pay per job was:
<bullet> $13,155 in the United States
<bullet> $13,198 in Oregon
<bullet> $11,922 in Union County
As of 2002 (the latest available annual data), average pay per job
was:
<bullet> $36,764 in the United States
<bullet> $33,685 in Oregon
<bullet> $26,033 in Union County
Therefore, since 1979, average earnings per job have increased 179
percent nationally, 155 percent statewide, and only 118 percent in
Union County.
Put another way, average earnings per job in Union County have
shifted from being 91 percent of the national average in 1979 to only
71 percent by 2002.
EDA Match.doc: February 20, 2004
Oregon Employment Department: Yohannan
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